The Chancellor today announced significant improvements to the Job Support Scheme, bringing it in line with some of the schemes I have seen around Europe, and this will go a long way towards protecting jobs over the winter months.
The new Job Support Open Scheme takes effect from 1 November, although employers will not be able to claim until 8 December, and it will run monthly thereafter with claims always made and paid in arrears. So employers will have to cover the full cost in November, and thereafter they will get the grant in arrears. The scheme runs for 6 months until the end of April 2021.
Here’s how it works:
An employee is required to work at least 20% of their normal hours, and they can undertake training in that time. They are paid their normal wage for those hours. For the hours not worked, the government picks up 61.67% of the cost and the employer pays 5%. There is a wage cap of £3,125, which is similar to the CJRS furlough scheme. £3,125 x 61.67% = £2,500, which was the cap under CJRS. The employer also has to pay the full amount of employer NICs and pension costs.
Let’s take a couple of examples:
James earns £2,400 per month and goes onto this scheme, working 20% of his normal hours. He gets paid as follows:
- £2,400 x 20% = £480 is his normal wage for those 20% of normal hours
- Of the remaining £1,920 (£2,400 – £480) the government will pay 61.67% = £1,184.06 and his employer will pay 5% = £96.
- James therefore earns a total of £1,760.06 (£480 + £1,184.06 + £96) which is 73.3% of his normal pay.
Samantha earns £4,000 per month and goes onto this scheme, working 20% of her normal hours. She gets paid as follows:
- £4,000 x 20% = £800 is her normal wage for those 20% of normal hours
- Because her earnings are above the cap, the contributions will be limited. Instead of the payment being on the remaining £3,200 of Samantha’s salary, it is capped at £2,500. That means the government will pay £2,500 x 61.67% = £1,541.75 and her employer will pay£2,500 x 5% = £125
- Samantha therefore earns a total of £2,466.75 (£800 + £1,541.75 + £125) which is 61.7% of her normal pay.
This is a big improvement over the original Job Support Scheme announced last month. Under that scheme, employers ended up paying 3 days’ wages for 2 days’ work, which is like time-and-a-half. It really didn’t make sense. Under the revised Job Support Scheme Open, it costs the employer 1.2x the normal cost. It’s still a burden that employers must choose to bear, or they make their staff redundant and when the recovery eventually comes, they have to go out and recruit all over again.
A few other fine print details to note:
- Employees must have been on payroll at some point between April 2019 up to 23 September 2020. I’m not sure why they go back to 2019, but that’s what the guidance states.
- Employers do not have to previously have claimed under the furlough scheme. This is open to all.
- Employers and employees must agree to the short hours working in writing.
- Employers may choose to top-up staff wages up to their full salary.
This is a much fairer deal for employers and employees. Hats off once again to Rishi Sunak. If only everyone in Government were as sensible and open to listening as he is.