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How will the Jobs Support Scheme work?

Emma Lunn
Written By:
Emma Lunn

More details have been published about how the government’s new Jobs Support Scheme, announced in the Winter Economy Plan, will work.

The Jobs Support Scheme is designed to protect “viable jobs” in businesses which are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce.

The scheme will open on 1 November 2020 and run for six months.

Employers will continue to pay its employees for time worked, but the burden of hours not worked will be split between the employer and the government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.

Who will be eligible?

Employees must have been on an employer’s PAYE payroll on or before 23 September 2020.

In order to support viable jobs, for the first three months of the scheme the employee must work at least 33% of their usual hours.

The government will pay a third of hours not worked up to a cap, with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages, where the government contribution has not been capped.

After three months, the government will consider whether to increase this minimum hours threshold.

Employees will be able to cycle on and off the scheme and do not have to be working the same pattern each month, but each short-time working arrangement must cover a minimum period of seven days.

What does the grant cover?

Grant payments will be made in arrears, reimbursing the employer for the government’s contribution.

The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.

“Usual wages” calculations will follow a similar methodology as for the Coronavirus Job Retention Scheme.

Employees who have previously been furloughed, will have their underlying usual pay and/or hours used to calculate usual wages, not the amount they were paid whilst on furlough.

Will the scheme work?

Ian Goodwin, director of employment tax at accountancy firm Mazars, says: “The winners in the chancellor’s latest move appear at first glance to be the small and medium sized businesses who have enough work to keep employees busy for at least a third of their hours.

“This is a potential lifeline for employees of family and privately owned businesses (as well as the businesses themselves) who can manage their workforce hours to make effective use of the new Job Support Scheme.

“However, the news is not going to help those who are on the brink and need to make redundancies. It is also not going to be available to large businesses in the UK unless they have a significant dip in turnover. It is likely that these businesses have already started redundancy consultations given the 45 days’ notice periods so despite the chancellors’ best efforts we may still see a significant spike in unemployment over the coming weeks.”

Simon McVicker, director of policy, public affairs and communications at BackinBusiness, says: “The job support scheme announced by the chancellor today is based on the German Kurzarbeith Scheme. This is an oven-baked solution for the chancellor – it is a tried and test way of saving viable jobs in economic downturns.

“We welcome this new scheme as it protects workers’ income and therefore supports aggregate demand. Germany was the only country during the financial crisis in 2009 not to have a fall in employment.

“However, Sunak’s scheme is far less generous than the furlough scheme and many small businesses already struggling with cashflow, may not even be able to support a third of the wages of their workers. Would they still be considered a viable business under this scheme?”