Following a somewhat confusing combination of a statement to the House of Commons from the Chancellor this morning, quickly followed up by a tweet from HM Treasury, employers now know that there is to be a new Job Support Scheme which will see the Government bearing part of the cost of pay for employees who are working reduced hours. The stated aim of the Government is to provide support for jobs which are genuinely viable, and not for those which now only exist within the furlough.
To qualify for the support, employees must be working for at least 1/3 of their normal hours. Whilst the initial announcement suggested that the Government would share equally the cost with the employer of making up the total pay to 2/3rds of normal pay, in fact the employer will bear the cost of the hours worked in full, together with 1/3 of the hours not worked. The Government contribution will be limited to the cost of 1/3 of the hours not worked. On the Government’s own example, the employer will pay 55% and the Government 22%, of the total sum paid to an employee working 1/3 of normal hours. So as an example, an employee who normally works 40 hours per week and earns £500 will receive £166.66 from his/her employer for the hours worked. He/she will also receive £111.11 from each of the employer and the Job Support Scheme making a total of £388 .89, approximately 77% of normal pay.
The Government will not contribute to the cost of the Employer’s Social Security contribution and in a departure from the position under the Job Retention Scheme, claims for this support will not be permitted for periods of notice where the employee is being dismissed by reason of redundancy. The option of full time furlough will end in October.
The provision of further financial support will certainly be welcomed, particularly by businesses affected by requirements imposed this week on pubs, bars and restaurants to close at 10pm. Many other businesses too have seen reduced demand and this initiative should help them.
However, the need for staff to be actively at work for at least 1/3 of normal hours is likely to be a challenge for businesses who wish to keep their experienced staff for a post COVID-world, but simply cannot provide 1/3 of normal hours to all employees. This requirement is also likely to increase administrative costs arising from managing a larger number of employees working fewer hours and sadly some employers may find the option of early reduction in numbers through redundancy a simpler option. Similarly the relative complexity of the new scheme as compared with the original furlough scheme may act as a deterrent to adoption.
The Job Support Scheme is open to all small and medium sized businesses regardless of sector and finances. For larger businesses, the support will be available only if they can demonstrate a reduction in turnover. Employers will be able to access the new scheme whether or not they have previously made use of the furlough under the existing scheme as long as employees for whom a claim is made were part of a payroll submission made to HMRC on or before 23 September 2020. Employers can, if they wish, make claims under both schemes during the remaining operation of the Job Retention Scheme.
Further details will be published shortly by the Government.