HM Insights

Breaking - New Jobs Support Scheme to replace Coronavirus Job Retention Scheme

Correct as of 24 September 2020

The Chancellor Rishi Sunak was today (24 September 2020) in Parliament to announce the next phase in the economic response to coronavirus, with the aim of protecting jobs and supporting the economy. The new "Jobs Support Scheme" will come into force in November effectively replacing the existing Coronavirus Job Retention Scheme.

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Further details of the Jobs Support Scheme have since been published in the form of a policy paper by HM Treasury.

Background

At the start of lockdown as businesses were ordered to close, the Coronavirus Job Retention Scheme (CJRS) was introduced and employers were able to furlough staff whose roles were affected by the pandemic. The scheme was extended in May until the end of October with a gradual reduction in the contribution made by HM Government from August onwards.

The Chancellor had recently came under increasing pressure from opposition parties, business groups and trade unions, warning of mass redundancies if the CJRS was not replaced at the end of October. With further public health restrictions announced earlier this week the Chancellor said, in his statement, it was appropriate to also announce new measures of economic support to businesses.

Jobs Support Scheme

The aim of the scheme is to support employees in work, and allowing them to work shorter hours as an alternative to redundancy. The Chancellor was clear the new scheme is not intended to support jobs that were "no longer viable".  The Job Support Scheme is designed to protect viable jobs in businesses that are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce. The company will continue to pay its employee 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 an agreed wage reduction), and the employee will keep their job.

Some detail has been provided in the Treasury's factsheet but some details are still unknown, with it being expected that a further set of directions or regulations will be published in due course.

The new scheme has been announced as based on three main principles:

  1. The scheme would support "viable jobs" – employees must work at least one third of their normal hours, and employers would pay the employee as normal for the hours they work. For the remaining hours not worked, the Government and the employer would pay 1/3 of those wages each. The employee would keep their job.
  2. The support would be targeted at businesses that need it the most. All SME's are eligible for the scheme but large businesses would only be eligible if their turnover has fallen through the crisis. Large business will have to meet a financial assessment test and HM Government expects that large employers will not be making capital distributions (such as dividends), while using the scheme.
  3. The scheme will be open to employers across the UK even if the employer had not previously used the furlough scheme. Significantly, employers who have used the CJRS will still be able to claim the Job Retention Bonus and access support in this new scheme.

In his announcement the Chancellor stated the Scheme would last for six months starting in November, so employers can look forward to this support until the end of April 2021.

The Chancellor also announced that the existing Self-Employment Support grants would be extended for a further six months on similar terms to the new Jobs Support Scheme.

Further Details from Treasury Policy Paper

As outlined above following the Chancellor's initial announcement further details of the new scheme were revealed in a subsequent Treasury Policy Paper. These points include:

  • The Government contribution will be capped at £697.92 a month.
  • Employees must be on an employer’s PAYE payroll on or before 23 September 2020. This means a Real Time Information (RTI) submission notifying payment to that employee to HMRC must have been made 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. After 3 months, the Government will consider whether to increase this minimum hours threshold.
  • 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. Full details will be set out in guidance shortly.
  • 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.
  • Grants will be payable in arrears meaning that a claim can only be submitted in respect of a given pay period, after payment to the employee has been made and that payment has been reported to HMRC via an RTI return.
  • Employers must agree the new short-time working arrangements with their staff, make any changes to the employment contract by agreement, and notify the employee in writing. This agreement must be made available to HMRC on request.

As with the CJRS it is likely that the new schemes will be subject to other eligibility criteria and most likely more rigorous scrutiny by HMRC to reduce abuse of the scheme.  Employers considering using the scheme will, aside from performing significant calculations to assess the financial value of the scheme as opposed to redundancy, need to carefully consider how to consult staff over the prospect of using the scheme, because it may need to be one of a number of options considered by employers.  And of course, there will likely be many different questions that HM Government will need to identify and answer in further guidance and directions, including, for example, if or how the scheme should work if employers already have the opportunity to unilaterally place staff on to short-term working.  

We will provide a further update once further guidance and detail is provided.

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If you have any queries please don't hesitate to contact one of the employment team to discuss further.

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