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Insight

COVID 19: Job Support Scheme

25/09/2020

Locations

United Kingdom

"Our primary goal has been to support people's jobs, but the way in which we achieve that must evolve" – Rishi Sunak 

The government has announced a new package of measures to protect the economy and businesses throughout the winter months, acknowledging that the economy needs to undergo another adjustment whilst the virus and restrictions continue to be a part of our everyday lives.

This adjustment confirms the end of the furlough scheme (described as an "immediate, short term protection for millions of jobs during a time of crisis"), and the beginning of a new Job Support Scheme.

Job Support Scheme

The new 6-month scheme begins in November, following the end of the furlough scheme on 31 October. With 9.6 million employees still relying on the furlough scheme, the ramifications for employers and employees in this transition is still to be determined.

The government have stated that the core aim of the Job Support Scheme is to support viable jobs, rather than continuing to hold employees in jobs that only exist as a result of the furlough scheme. This is in keeping with the government's recent attempts to kick-start the economy following the downturn caused by COVID-19.

The government have set up a three-part plan:

Support viable jobs

  • Employees must work a minimum of 33% of their usual hours during the first three months of the scheme (the working time requirement may be increased at the three month mark)
  • Employers must pay the wages of staff for those hours that they have worked
  • For the remaining hours not worked, the government and the employer will pay 1/3 of the wages each
  • Employers will need to notify employees in writing, and agree short time working arrangements

Open to all

  • Open to businesses across the UK even if they have not previously used the furlough scheme

Target employers who need it most

  • All small and medium size businesses are eligible to apply for the scheme
  • Large businesses are only eligible if their turnover has fallen during the crisis and if they will not be making capital distributions whilst accessing the grant.

The government is prepared to take some steps to protect jobs at a time where the country is facing mass redundancies; however, the benefit to employers of the scheme appears to be limited.  Employers will be required to pay higher wages than the proportionate amount of work they get in return from the employee. At the lower end, an employee will work 33% of their normal hours; the employer will be required to pay 55% of their normal pay while the employee will receive the benefit of the Government subsidy and receive 77% of their pay. This is unlikely to be an attractive option to struggling businesses and could force many companies into the position of needing to make redundancies – exactly what the government are trying to avoid.

The fact that an employer will need to fund a third of an employee's usual hours to qualify for the scheme, will again leave many wondering how businesses which are not able to open and operate due to continuous changes in local restrictions across the country, will be able to support jobs. Small businesses and the hospitality sector are likely to fall victim to this scheme and the lack of clarity surrounding it.

The announcement clearly leaves many questions unanswered, and we will continue to monitor the guidance around the new scheme.  It is evident that many areas still need to be ironed out and whether or not the Job Support Scheme will achieve the governments stated aims remains to be seen. 

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