What is the new Job Support Scheme?
The Job Retention Scheme was due to expire at the end of October and the Chancellor has previously said that it would not be renewed.
However in his Autumn Announcement the Chancellor announced a replacement if the form of the New Job Support Scheme, the purpose of which, he said, was to protect viable jobs in businesses who are facing lower demand over winter months due to Covid 19.
The main thrust of the scheme is that the employer will pay the employees for the hours worked and then the shortfall will be split three ways between employer, the government and the employee.
The theory is that below the cap level, employees will earn at least 77% of their normal wages and assuming that they still meet the criteria employers will be eligible for the ￡1,000 job retention bonus for previously furloughed employees, if they are still in employment at 31 January 2021
In order to qualify for the scheme employers, do not previously have needed to use the old job retention scheme but they must have a UK bank account and UK Pay as you earn scheme.
Employees must be on the employer’s payroll on or before 23 September 2020 and work at least 33% of their standard hours.
The 33% applies for the first 3 months of the scheme after which time the Government will review that percentage.
During the period of the scheme the employer will not be able to make a claim for an employee if it makes the employee redundant or puts the employee on notice of redundancy.
Employees can join and leave the scheme but must each short time working arrangement must be for a minimum period of at least 7 days.
Larger employers must be able to demonstrate that their turnover is lower than before COVID 19 and will not be expected to be paying dividends or making share buy backs during the period of the scheme.
Employers will claim their entitlement from HMRC monthly in arrears so they will have to fund the immediate shortfall in cash flow.
So as an example, an employee that works the minimum qualifying 33% of their usual week will receive their usual wage for that time, a further 22% from their employer and 22% from the Government giving a total pay of 77% of their usual weekly wage
So the employer will pick up the bill for their 33% and 22% meaning that they are paying 55% plus add on costs for national insurance, pension costs etc, for just 33% of hours worked.
That is a big pill to swallow and the employer will really need to be convinced that the business really does have to retain its staff.
Furthermore, the price differential given the choice of retaining 3 employees working 33% of time, or 1 employee on full time is significant.
The cost of the three staff at 55% each is 165% of normal wages whilst retaining one member of staff 100% of normal wages.
Given that stark choice I don’t think that there will be many employers that will opting to retain all three. Sadly in that respect the scheme may not be as successful in retaining jobs as the Chancellor hopes.