The UK Government’s new Job Support Scheme

published on 1 October 2020 | reading time approx. 2 minutes

On 24 September 2020, the UK Chancellor, Rishi Sunak, set out the UK Government's new Job Support Scheme in a statement to the House of Commons. Based on the German-style system of wage subsidies ("Kurzarbeit"), the scheme will be introduced on 1 November 2020 and replaces the Furlough Scheme which will close on 31 October 2020.  The scheme is designed to protect viable jobs in businesses which are facing lower demand over the winter months due to Coronavirus. Below is a brief summary of the information we have so far. This may be subject to change when full details of the scheme are released.

The Job Support Scheme will run for six months and help avoid redundancies by keeping employees in work.  The Government will contribute towards the wages of those employees who are working shorter hours than normal due to the decrease in demand. Employers will continue to pay the wages of staff for the hours they work but, for the hours not worked, the Government and the employer will each pay one third of their usual salary. In order to get this support, employees must be working at least 33 percent of their normal hours and have been on the employer's payroll since or before 23 September 2020. It was announced that the level of grant will be calculated based on the employee's usual salary, capped at £697.92 per month.

Example

• Beth normally works 5 days a week and earns £350 a week. Her company is suffering reduced sales due to Coronavirus. Rather than making Beth redundant, the company puts Beth on the Job Support Scheme, working 2 days a week (40 percent of her usual hours).

• Her employer pays Beth £140 for the days she works.
• For the time she is not working (3 days or 60 percent, worth £210), she will also earn 2/3, or £140, bringing her total earnings to £280, 80 percent of her normal wage. 
• The Government will give a grant worth £70 (1/3 of hours not worked, equivalent to 20 percent of her normal wages) to Beth's employer to support them in keeping Beth's job.

Employees cannot be made redundant or put on notice of redundancy during the period with which their employer is claiming the grant for that employee.

The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough scheme. All small and medium-sized firms are eligible but large firms are only eligible if their turnover has fallen in the pandemic and will be subject to a financial assessment test.

Extension of the Self Employed Income Support Scheme

In addition, the Chancellor announced that the Government will continue to provide support for self-employed individuals by extending the Self Employment Income Support Scheme Grant (SEISS). An initial taxable grant will be provided to those who are currently eligible for SEISS and are continuing to actively trade but face reduced demand due to Coronavirus.

Giving businesses flexibility to pay back loans

A new "Pay as you Grow" scheme will be introduced to help businesses whose trading has been affected by the pandemic. Small firms can extend their Bounce Back Loans from 6 years to 10 years, which should halve their monthly repayments, and make interest-only payments if needed. This will provide flexibility for firms repaying a Bounce Back Loan.

In addition, the Chancellor has also announced he would be extending applications for the Government's Coronavirus loan schemes until the end of November. As a result, more businesses will now be able to benefit from the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme and the Future Fund.

Tax cuts and deferrals

There will be more help for the hospitality sector, which has been worst hit by the crisis. Extending the cut in the VAT rate to 5 percent until 31 March 2021 will let businesses retain more revenue. Further, the Chancellor announced that he will be letting businesses who deferred their VAT bills more time to pay by spreading the payment over eleven smaller payments through the New Payment Scheme, which gives them the option to pay back in smaller instalments.

Further updates will be available in due course. In the interim, please do not hesitate to contact us if you require any further information on these measures.