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Employment law for employees & Employment law for employers

Coronavirus update: Job Support Scheme

On 24 September 2020 the Chancellor of the Exchequer unveiled the government’s ‘winter economy plan’. Central to this development was the inception of the Job Support Scheme, the terms of which changed on 9 October and then again on 22 October. Kathryn Burke and Tania Goodman outline the scheme and give their thoughts.

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The Job Support Scheme (Open for Business)

The Job Support Scheme (Open) should be used when a business can open safely and has not been forced to close. At its core, from 1 November 2020 the government will contribute to employees’ pay in certain circumstances.

The scheme is open to all employees on PAYE payroll on or before 23 September and is specifically designed for those facing decreased demand even though they can operate safely and may need financial support to retain their staff.

The employee must work a minimum of 20% of their usual hours for which they will be paid by their employer directly. In addition, the employee will receive 66.67% of their normal pay for hours not worked, made up of contributions from the employer and the government.

The employer will pay 5% of reference salary (before any salary sacrifice) for the hours not worked, up to a maximum of £125 per month, with discretion to pay more if they wish. The government will pay the remainder of 61.67%, of reference salary for the hours not worked, up to a maximum of £1,541.75 per month. This will ensure employees continue to receive at least 73% of their normal wages, where they earn £3,125 a month or less.

Like furlough, grant payments will be made in arrears and the claim portal is expected to open on the government website at the start of December.

The scheme will last for six months and should only be used to protect viable jobs. It is primarily designed for businesses that need to survive the winter as demand for their services falls, with the realistic prospect of recovering in the spring. This means that if an employer knows it needs to make job cuts for the long term but decides to take advantage of the scheme, they could be doing so fraudulently and exposed to an investigation by HMRC.

The scheme appears to be more flexible than its furlough predecessor. It is also open to any employers that did not use furlough and employees can to ‘cycle on and off the scheme’. This means that employees do not need to work the same pattern each month and employers can change arrangements to meet their fluctuating business needs. However, each short time working arrangement must cover a period of 7 days and employers should agree working patterns with their affected employees.

The scheme is primarily to help smaller businesses and only open to those larger businesses that can demonstrate their revenue has fallen significantly as a direct result of the pandemic.

In addition to this scheme employers can also claim the Coronavirus Job Retention Bonus providing £1,000 per previously furloughed employee if they remain in genuine employment until 31 January 2021.

The Job Support Scheme (Closed for Business)

The government announced a second limb of the Job Support Scheme for businesses legally required to close their premises entirely as a direct result of tighter local or national coronavirus restrictions – such as pubs and restaurants forced to close under Tier 3.  This has been called the ‘Job Support Scheme (Closed)’ and goes further than the Job Support Scheme (Open).

For closed businesses, the government will pay two thirds of their employees’ wages, subject to a cap of  £2,083.33 per month, although the employer can top this up if they wish. The government appears to have made this move to coincide with the announcement of the three-tier lockdown system. (The scheme is similar to furlough, although the furlough cap was higher with the government originally picking up 80% of furloughed employees’ wages – subject to a monthly cap of £2500).

Our view

The inception of the Job Support Scheme (Open) is a positive step to supporting certain businesses, although there is some confusion over those that can make a claim. There is no clear definition of what constitutes ‘decreased demand’ and whether there is any threshold to meet this criterion. Inevitably it may be open abuse and it is worth keeping in mind that ‘furlough fraud’ is estimated to have cost the country as much as £3bn.

Whilst the Job Support Scheme offers a lifeline to some, including lower paid workers on fewer hours due to diminished need, there are question marks over the sustainability of the government’s response to the crisis. This raises bigger issues about the overall strategy against an apparent backlash from the worst affected regions and others. The mutterings are getting louder querying for how much longer can this go on and how many decades will it take for us to pay it all back?

If you have any questions about the end of furlough, the Job Support Scheme, making redundancies or any other employment related queries then the Collyer Bristow Employment Team is on hand to help.

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Kathryn Burke

Associate

kathryn.burke@collyerbristow.com