Before diving into the positives and negatives of the new Job Support Scheme I want to recap on what it is.
The new Job Support Scheme was announced by the government in September, and it'is designed to top up the wages of employees unable to work full-time because of coronavirus restrictions over the winter. Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria.
Businesses will continue to pay their employees for time worked, but the burden of hours not worked will be split between the employer, the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
The scheme will open on 1 November 2020 and run for 6 months, until April 2021.
This scheme is designed to protect jobs where businesses are facing lower demand over the winter months due to coronavirus. 9.6 million employees are still on furlough leave across the UK, with the scheme still supporting 1.2 million businesses. This new scheme could help mitigate the impact of the end of Coronavirus Job Retention Scheme ending on 31st October.
Employers can receive up to £697.92 per month wage top up of eligible employees unable to work full-time because of coronavirus restrictions over the winter.
An unexpected silver lining to the scheme is that employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria. This is a one-off payment of £1,000 to employers who have availed of the CJRS for each furloughed employee who remains continuously employed until 31 January 2021.
It’s far less generous than the current Job Retention Scheme - The Government contribution will be capped at £697.92 a month compared to the initial £2,500 plus associated Employers’ National Insurance and pension contribution under the Job Retention Scheme placing a greater responsibility on the employer to fund employment costs. In fact, under the scheme the government never pays more than 22% of the employees' overall salary.
The employer ends up paying more in wages than the hours they get in return - The percentage cost to the employer far outweighs the percentage of productive hours provided by that employee to the business and a stark reality is that it costs more than 50% more to employ several people working 40% of the time compared to fewer people working full time.
Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee. Therefore, employers face the dilemma now of assessing demand for the forthcoming months for their business and making decisions about the number of employees required.
Job Support Scheme payments will be made monthly in arrears commencing in December, reimbursing the employer for the government’s contribution. The grant will not cover employer NICs or pension contributions, but these contributions will remain payable by the employer. This means that the overall cost of employment for employers is higher than simply their contribution to employee salaries.
Sadly, it does not appear that the Job Support Scheme will avoid a rise of redundancies over the coming months as employers seek to manage their cashflows to survive the winter months. Join our latest webinar to find out more about the New Job Support Scheme and whether it’s right for your organisation.
In this webinar, we look at what you need to know about the new Job Support Scheme, including which employees are eligible, the level of government funding, and how the scheme is actioned through payroll. We will also explore the rise in redundancies and the new changes regarding statutory redundancy and notice pay for furloughed employees.
What you'll learn:
The Coronavirus Job Retention Scheme has been hugely popular and will continue to support jobs until the end of October, however, from 1st July, many changes were made to the scheme.
The government’s furlough scheme will wind down in upcoming months, employers will need to contribute to employees’ wages and the Coronavirus Job Retention Scheme will end fully at the end of October.
Before August, employers could claim 80% of a furloughed employee’s wage costs, to a monthly maximum of £2,500. The government also refunded employer NICs and auto-enrolment pension contributions on this sum.
Going forward, the level of grant will be reduced each month. Employers will have to start contributing to the wage costs of paying their furloughed staff, and this employer contribution will gradually increase in September and October.
Employers will continue to be able to choose to top up employee wages above the 80% total and £2,500 cap for the hours not worked at their own expense if they wish. Employers will have to pay their employees for the hours worked.
After 31st October, the government contributions will finish and the scheme will come to an end.
When the scheme was extended until October, employers were promised that they would not face a ‘cliff-edge’ withdrawal of funding and that the scheme would be wound down gradually. The wind-down phase of the furlough scheme is more generous than many had expected, with most furloughed employee wage costs still being met by the government over the coming months. Depending on how the re-opening of businesses progresses, this approach may give some employers time to rebuild and save jobs that would otherwise have been lost.
During last month’s summer economic update, the chancellor announced that although the scheme will end at the end of October, all businesses can avail of a Job Retention Bonus Scheme for each employee they bring back from furlough. This is a one-off payment of £1,000 to employers that have used the Coronavirus Job Retention Scheme for each furloughed employee who remains continuously employed until 31 January 2021.
To be eligible, employees will need to earn at least an average of £520 per month for November, December and January, they must have been furloughed at any point and legitimately claimed for under the Coronavirus Job Retention Scheme, and they must have been continuously employed up until at least 31 January 2021.
Employers will be able to claim the bonus from February 2021 once accurate RTI data to 31 January has been received.
BrightPay software is being continually updated to ensure you can adapt your processes to all the upcoming changes regarding furlough.
If you’re not already using BrightPay, why not book a demo or download BrightPay’s free 60 day trial? One of our payroll experts will show you its clear and easy to use interface and talk you through its underlying comprehensive set of payroll functionality.