Employment Law Update: The New Job Support Scheme – 24 September 2020

Thursday 24th September 2020

The news today is all about Chancellor Rishi Sunak’s new Jobs Support Scheme. But what do we know about the new scheme?

Delivering a speech in Parliament earlier this afternoon, the Chancellor announced a package of measures that will continue to protect jobs and help businesses through the uncertain months ahead as we continue to tackle the spread of the virus.

The package includes a new Jobs Support Scheme to protect millions of returning workers, extending the Self Employment Income Support Scheme and 15% VAT cut for the hospitality and tourism sectors, and help for businesses in repaying government-backed loans.

The new Job Support Scheme will be introduced from 1 November to protect viable jobs in businesses who are facing lower demand over the winter months due to coronavirus  (what this means in practice will no doubt evolve in due course).

Under the scheme, which will run for six months and help keep employees attached to the workforce, the government will contribute towards the wages of employees who are working fewer than normal hours due to decreased demand.

Employers will continue to pay the wages of staff for the hours they work – but for the hours not worked, the government and the employer will each pay one third of their equivalent salary. The other third will need to be borne by the employee. So again care will need to be taken to ensure that the contractual position is clear and existing letters used for the furlough scheme will need to be reviewed and amended.

This means employees who return to work on reduced hours will still be paid for two thirds of the hours they don’t work. This will ensure employees earn a minimum of 77% of their normal wages, where the Government contribution has not been capped. Of course this will not be the case where earnings mean that the cap must operate.

In order to support only viable jobs, employees must be working at least 33% of their usual hours. The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.

In a nutshell:

  • The scheme will run for six months starting in November
  • Previous use of the furlough scheme will not be a requirement
  • All small and medium sized businesses will be eligible for the scheme There will be no financial assessment test for small and medium enterprises (SMEs)
  • Larger business will be eligible if their turnover has fallen during the crisis
  • It will apply to staff who can work at least a third of their usual hours
  • Employers will pay staff for all the hours they do work
  • For the hours employees can’t work, the government and the employer will each cover one third of the lost pay
  • Usual wages” calculations will follow a similar methodology as for the Coronavirus Job Retention Scheme. Full details will be set out in guidance shortly.

NOTE: 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.

Case study examples

Example No 1 – half of normal hours available:

Jack normally works 40 hours a week for Rishi Ltd for £2,000 per month

Rishi Ltd currently only has 20 hours a week for Jack.

Jack is therefore paid £1,000 per month for his 20 hours a week actually worked.

He is then paid a total of £666.66 per month in respect of the 20 hours a week he doesn’t work  (2/3rds) (i.e. £333.33 by Rishi Ltd another £333.33 is claimed from the government)

The missing £333.34 is what Jack has to forego to make the scheme work – unless of course, Rishi Ltd decides to make up his pay to the full rate, as many employers did under the CJRS.

So in this example Jack gets 83.3%  of his full normal pay for working 50% of his normal hours of which 19.9% is paid by the government.

Example No 2 – two thirds of normal hours available:

Elaine normally works 39 hours a week for Sunak Ltd for £9,000 per month

Sunak Ltd currently only has 26 hours a week for Elaine.

Elaine is therefore paid £6,000 per month for her 26 hours a week actually worked.

She is then paid a total of £1,697.92 per month in respect of the 13 hours a week she doesn’t work (i.e. £1,000 by Sunak Ltd (1/3rd) another £697.92 (i.e. the capped amount)  is claimed from the government)

The missing £1,302.08 is what Elaine has to forego to make the scheme work – unless of course, Sunak Ltd decides to make up her pay to the full rate, as many employers did under the CJRS.

In this example Elaine gets 85.5% of her normal full pay for working 66% of the hours of which 9% is paid by the government.

Example No 3 – one third of normal hours available:

Ben normally works 30 hours a week for RS Ltd for £1,500 per month. RS Ltd currently only has 10 hours a week for Ben.

Ben is therefore paid £500 per month for his 10 hours a week actually worked.

He is then paid a total of £666.66 per month in respect of the 20 hours a week he doesn’t work (i.e. £333.33 by RS Ltd (1/3rd) another £333.33 is claimed from the government)

The missing £333.33 is what Ben has to forego to make the scheme work – unless of course, RS Ltd decides to make up his pay to the full rate, as many employers did under the CJRS.

In this example Ben gets 77.7% of his normal full pay for working 1/3rd of the hours of which 28.5% is paid by the government.

Example No 4 – 20% of normal hours available:

Janine normally works 40 hours a week for Bojo Pandemic Response Ltd (BPRL) for £3,000 per month

BPRL currently only has 10 hours a week for Janine.

Janine is therefore paid £750 per month for her 10 hours a week actually worked.

No grant can be claimed as Janine is working less than 1/3rd of her normal contracted hours.

Payment Guide

Hours Employee Worked 33% 40% 50% 60% 70%
Hours Employee Not Working 67% 60% 50% 40% 30%
Employee Earnings (% of normal) 78% 80% 83% 87% 90%
Gov’t Grant (% of normal wages) 22% 20% 17% 13% 10%
Employer Cost (% normal wages) 55% 60% 67% 73% 80%

This summary is for guidance only. For further advice contact one of our employment law specialists below.