[Last updated on October 23, 2020]
On Thursday the 24th of September, Chancellor Rishi Sunak announced the launch of the new Job Support Scheme.
On Thursday 22nd of October, updated guidance was given on the Job Support Scheme including additional support under the “Job Support Scheme Closed” for businesses in tier 3 areas.
The new Scheme will begin on the 1st of November and will run for a total of six months. It has been designed to replace furlough leave, introduced under the Coronavirus Job Retention Scheme, which is scheduled to end on the 31st of October.
What is the Job Support Scheme?
The Job Support Scheme has been introduced to protect viable jobs in businesses who will continue to be affected by the coronavirus crisis over the winter months.
Companies will continue to pay employees for time worked; however, the cost of hours not worked will be split between the employer and the Government:
- The Government will pay up to 61.67%, up to a cap, of hours not worked.
- The employer will contribute a further 5%.
This will help ensure that employees earn a minimum of 77% of their normal wages.
Businesses situated in areas of the country under tier 3 restrictions will benefit further with HMRC covering the full cost of the employer by paying two-thirds of employees salaries when they cannot work for one week or more.
Job Support Scheme example
Colin typically works eight hours a day, five days a week. He earns £100 a day, and therefore £500 a week.
Colin's employer has decided to reduce his usual hours by 80%, meaning that he now works one day per week.
For the time he continues to work, Colin will earn 100% of his wage, totalling £100.
The remaining 80% is equivalent to £400.
Colin’s employer will contribute an additional 5% of the unworked hours, totalling £20.
The Government will contribute an additional 61.67% of the unworked hours, totalling £246.68.
Colin’s employer will pay a total of £120 (£100 for worked hours and £20 for unworked hours).
This means that Colin's overall earnings will be £366.68 (£120 + £246.68), equivalent to over 70% of his usual wages.
Who is eligible for the Job Support Scheme?
All employers with a UK bank account and UK PAYE schemes are eligible to claim the grant. Employers can claim regardless of whether they previously used the Coronavirus Job Retention Scheme.
Larger businesses will have to meet a financial assessment test to demonstrate that their turnover is lower now than before being affected by the coronavirus crisis.
Small and medium-sized businesses will not have to take part in this assessment.
Employers will still be able to claim the Job Retention Bonus if they meet the relevant criteria.
Employees must be on their employer's PAYE payroll and have been reported on an RTI submission to HMRC on or before the 23rd of September 2020.
To support viable jobs, during the first three months of the Scheme, employees must work at least 20% of their regular hours. The Government will likely reassess the minimum threshold in January.
Employees will be able to "cycle on and off" the Scheme and are not required to work the same amount each month. However, each working arrangement must cover a minimum period of seven days.
Employees in businesses in tier 3 areas must be unable to work for one week or more for employers to benefit from the Government’s additional support of covering the full employer cost.
What does the Job Support Scheme cover?
Every hour that an employee does not work, both the Government and employer will contribute towards the hourly wage for that employee. It is important to note that the Government contribution is capped at £1,541.75 each month. This total is considerably lower than the £2,500 cap introduced under the Coronavirus Job Retention Scheme.
The Government will reimburse employers, and make the payment in arrears. It will not cover Class 1 employer National Insurance Contributions (NIC) or pension contributions. The obligation for these payments will remain with the employer.
Employees previously placed on furlough will have their usual underlying pay used to calculate wages, not the amount they received while on furlough.
Employers can choose to top up their employees' wages above the employer contribution for hours not worked.
What happens when an employee is placed on the Job Support Scheme?
Employers are required to agree on the new working arrangements with the affected employee. They must subsequently let the employee know in writing and make the agreement available to HMRC upon request.
If an employee is placed on the Job Support Scheme, the employer will not be allowed to put that employee on notice or begin a redundancy process with them.
How can businesses claim for the Job Support Scheme?
The Scheme starts on the 1st of November, 2020 and will run for a period of six months through to the 30th of April, 2021.
Employers will be able to claim online through the GOV.UK website from December the 8th 2020 for wages paid in the November pay period with final claims being made in early May 2021.
Claims will be paid on a monthly basis after the employee has been paid and an RTI submission for the periods covered has been submitted.
Calculating claims for the Job Support Scheme
Calculating claims under the Job Support Scheme will be done in a similar way to the furlough scheme. This means that employees need to have their usual hours calculated and their salary under the Job Support Scheme will be based on a reference salary.
PayFit blog author