shaw gibbs - accountants and business advisers
accountants & business advisers

Have a question? Like to know more? - Contact us or Call +44-1865 292200 or +44-20 7436 4773, Mon-Fri 8:15am - 5:15pm

*Initial meeting is free of charge

To latest news
Job Support Scheme v's Furlough - the key differences - news article image

Job Support Scheme v's Furlough - the key differences

9 Oct 2020

11 minute read

Rishi Sunak’s Winter Economy Plan included a plan to soften the blow of the Coronavirus Job Retention Scheme (furlough) coming to an end on the 31 October. The Job Support Scheme (JSS) is to help businesses retain staff and protect jobs which are likely to be affected by Covid-19 over the winter months. This might be through a lack of demand which will continue to hit certain sectors hard or because social distancing will reduce customer capacity and therefore income.

Viability

The first point of difference between furlough and JSS is that the JSS is only for viable jobs, this means that employers must genuinely plan to retain the employee(s). With the furlough scheme, the Government did not want a large influx of the UK workforce claiming Universal Credit so the intended outcome was that the majority of people would be retained on furlough leave by an employer, whether or not the employer believed that the role(s) were viable in the longer-term. What I found with the furlough arrangements is that employers had some time to consider which roles were viable and in some cases, the thought processes changed over the period. For example, some of my clients moved people in and out of furlough arrangements until they were able to settle on their workable business-model.

The working hours

During the first three months of the scheme, the employee must work at least 33% of their usual hours. After this point, the Government will take a judgement on whether to increase the minimum hours required.

The company will continue to pay its employee for time worked and the balance of hours not worked will be split between the employer and the Government (through wage support) and the employee (through a wage reduction). The Government will pay a third of hours not worked (up to a cap) with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages (where the Government contribution has not been capped). Employees can be cycled on and off the scheme and do not have to have the same working pattern each month but each period of JSS must cover at least seven days.

So as an example if your employee usually earns £1500 per month gross. They work (33%) £495, the employee will take home £1165 gross and the Employer will then be able to claim back £335 in the form of the Government Grant. Please remember the Employer will still need to pay the employers national insurance and pension contributions on the £1165 the employee be paid.

At the start of the furlough scheme, the Government were paying up to 80% of the furloughed employees wages (up to a cap) with the employer choosing whether to top up the payment to 100%. This meant that those on furlough were not working at all until the flexible furlough arrangement was brought in on 1 July.

Although the middle-ground option will be appreciated for employers who want to keep the members of staff they have invested time and resource into over the tenure of their employment, it does mean that the employer will likely be paying the employee more than the hours they have actually worked. For employers who were topping up furlough pay, this won’t come as too much of a shock but, for others – this could be a bitter pill to swallow.

The speculation is that the employer cannot top up the wages of the employee under the JSS and this means that it is likely that staff affected will be likely to look for new full-time employment. At the point of handing in their notice, the employer will then be responsible for paying 100% of pay during the notice period (this may also apply to holiday pay which may need to be paid at 100% from the employers pocket).

The eligibility criteria

In his statement, Rishi suggested that the JSS will be open only to SME’s and that it would be limited to particular sectors however the latest guidance states that all employers with a UK bank account and PAYE scheme can claim the grant. However, for large businesses the scheme is only open to those who can prove their income is significantly lower as a result of the pandemic.

The JSS will not be available for those making capital distributions such as dividends or share buybacks.

Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria and retain staff for at least the period required.

Payment in arrears

The JSS grant payments will be made in arrears and the claims can be made after the pay period (ie weekly or monthly), this means that unlike furlough pay, the employer must be able to pay the wages up-front and allow time for the grant payments to be made and processed before payment is made.

Informing the employee

This is an area which has not changed, under employment law, any amendment to pay and working hours must be put into writing and agreed with the employee. This can be arranged through an addendum to the contract rather than making this a full contract change. My colleague @Kerry Whitfield will be able to provide help on this as well as a script to assist with the employee conversation if required.

How to claim

The scheme will be open from the 1 November to the end of April 2021 and claims will be made through the .Gov website.

There is still a lot of detail we do not know about this scheme and in my experience of the furlough scheme, detail will be lacking and changes will be made up until the last minute. Perhaps this is why the Government chose for this grant to be paid in arrears rather than up-front? It is my opinion that now is the time to really delve into long-term staffing needs and assessing whether the JSS (which is far less generous and more restrictive than the CJRS) is the right option.

As ever, my colleagues and I at Shaw Gibbs are on hand to act as a sounding-board if you have enquiries.

Job Support Scheme v's Furlough - the key differences - news article image

Author:

Katie Preston

For more info contact us:

01865 292 200

020 7436 4773

© 2020 Shaw Gibbs Ltd

Your registration