The Chancellor has today announced a new Job Support Scheme that will run from 1st November 2020 for six months until April 2021, and which will replace the Coronavirus Job Retention Scheme which comes to an end on 31st October 2020.
The Government has taken this step having previously indicated that support for employers in terms of paying employees’ wages would end once furloughing stopped on 31st October. It has had to do so because of the risk of large scale job losses in sectors hit hard by the impact of Covid-19 and the recent restrictive measures that have been announced to combat the virus.
Under the Job Support Scheme, the employee must be working at least 33% of their usual hours of work. For whatever proportion of their usual hours that they do not work, the cost will be split evenly between the employer, the Government and the employee. The employer will pay one third of the employee’s pay for the unworked hours, the Government will pay one third and the employee will forego one third.
In practical terms, this would mean that an employee would receive no less than 77% of their usual pay, which is comparable to the guaranteed income under the furlough scheme.
A key difference is that the contribution being made by the employer will be greater than it has been under the existing furlough scheme, as the minimum contribution the employer could make towards the employee’s salary would be roughly 55%. The employer would also have to pay the employer’s National Insurance payments and pension contributions as normal.
A further change from the existing regime is that while an employer is claiming an employee’s wages under the Job Support Scheme, the employee cannot be made redundant or put under notice of redundancy. This change has probably been introduced to plug a loophole in the furlough scheme that allowed an employer to make a furloughed employee redundant and use the scheme to cover the bulk of their notice pay.
Just as was the case under the Coronavirus Job Retention scheme, the changes to the employee’s contract need to be agreed with the employee and the employer needs to retain a record of the employee’s agreement to this so that they can evidence it to HMRC.
The Government states that “large businesses” – a term which is as yet not clearly defined – will need to meet a financial assessment test to enable them to claim.
It remains to be seen whether the Job Support Scheme will be used as widely as the Government anticipates, or whether employers will take the view that it is more cost effective to either retain the employee on their full contractual hours or make them redundant.