The Furlough Scheme came to an end on 31 October, but some business sectors remain subject to restrictions. In his Winter Economy Plan, the Chancellor, Rishi Sunak, announced a new Job Support Scheme, which will replace the Furlough Scheme. The scheme was subsequently expanded to provide a higher level of support to businesses that were forced to close as a result of the imposition of Coronavirus restrictions.
The Job Support Scheme runs from 1 November 2020 to 30 April 2021. Under the scheme, employees must work at least one-third of their usual hours. The employer must pay the employee for one-third of the hours not worked and can claim a grant under the scheme for a third of the usual hours not worked. The employer must meet the cost of employer’s National Insurance on payments made to the employee and also on the grant paid by the Government. The employee will receive a minimum of 77% of their wages at their normal contracted rate. The payments will be liable to tax and National Insurance in the usual way. Pension contributions (employee and employer) due under auto-enrolment must also continue to be paid.
A claim can only be made in respect of an employee who was on the employer’s payroll on 23 September 2020. The employee does not need to have been furloughed under the Coronavirus Job Retention Scheme for a grant to be claimed on their behalf under the Job Support Scheme.
Grants can only be claimed in arrears, which means the employer must pay the employee both for the hours worked and for two-thirds of the unworked hours, before making a claim.
Is it beneficial?
The basic scheme is very costly for employers, as not only do they have to pay employees for one-third of the hours that they do no work at the normal rate, they also have to pay employer’s National Insurance and employer pension contributions on the grant claimed from the Government. The fact that claims can only be made after payment has been made to the employee will impact negatively on cashflow. From the employer’s perspective, it is more cost effective for one employee to be retained full-time (and paid for work they do), than to take back three employees who each work one-third of their usual hours and pay each of them for one-third of the hours not worked. Rather than saving jobs, the high cost of the scheme may mean that it has the opposite effect.
Higher support for business forced to close
Where a business is forced to close as a result of Coronavirus restrictions, the Job Support Scheme will pay two-thirds of an employee’s wages up to a maximum of £2,100 a month. The employer must meet the cost of the associated employer’s National Insurance and any employer pension contributions due under auto-enrolment. However, as with the basic scheme, claims can only be made in arrears, presenting a cashflow challenge for closed businesses.
Sam Niranjan or Sam Niranjan & Co make no representations or warranties with respect to the accuracy or completeness of the contents of these posts and cannot accept any responsibility whatsoever for any liability, loss or risk, personal or otherwise, which may arise, directly or indirectly, from reliance on information contained in the blog posts. We are not Independent Financial Advisors, and our advice and comments should not be regarded as investment advice.