On 24 September, the Chancellor unveiled a new Job Support Scheme (JSS) to try to avoid a wave of redundancies and job losses when the Coronavirus Job Retention Scheme (or furlough scheme) ends on 31st October 2020.
Businesses will continue to pay workers for the hours they work, but the JSS is designed to help support employee wages for the hours they lose, due to restrictions on working hours, or because of a lack of business due to economic decline. Here’s an overview of the scheme:
- The JSS will be introduced from 1 November 2020 and will continue for six months until 30 April 2021.
- All small and medium enterprises (SME) will be eligible to access the JSS automatically, without the need for a financial assessment test.
- The hurdle for large businesses will be much higher, with only those who are able to show that their turnover has been adversely affected by coronavirus being eligible. This will be assessed by a financial test.
- For an employee to qualify for the JSS, they must be on an employer’s PAYE payroll on or before 23 September 2020.
- Neither the employer nor employee needs to have previously used the furlough scheme in order to apply for the JSS.
- Employees will need to work at least 33 per cent of their usual hours in order to access the JSS. The government will consider whether to increase this minimum requirement from February 2021.
- Employees being paid under the JSS will receive at least 77 per cent of their normal wages, subject to the cap on government contributions.
- Each short-time working arrangement must cover a minimum pay period of 7 days. However, employees will be able to work different patterns in different pay periods and can “cycle on and off” the JSS.
- Employers must agree the new short-time working arrangements with employees and confirm them in writing.
- Significantly, and in contrast to the furlough scheme, employees cannot be made redundant or put on notice of redundancy during the period for which the employer is claiming a grant for that employee.
- Employers using the JSS will also be able to claim the Job Retention Bonus if they qualify.
How it works
Payments under the JSS will be paid monthly in arrears and will be as follows:
- For hours worked: employers will be responsible for paying the normal contracted wage for any time which employees work (a minimum of 33 per cent).
- For hours not worked: the employee will be paid two-thirds of their usual hourly wage for any hours not worked, made up as follows:
- The government will pay one-third of hours not worked, up to a cap of £697.92 per month. Since the maximum hours an employee won’t work is 67 per cent, this means that the maximum government contribution will be 22 per cent. This will reduce on a sliding scale the more hours an employee actually works.
- Employers will also pay one-third of hours not worked.
- Employers remain responsible for paying employer National Insurance Contributions and pension contributions.
Here’s how payments under the JSS will be made
How the JSS compares to the Job Retention Scheme
The new job support scheme represents a significant new intervention from government to support jobs through the crisis, but it is significantly less generous than the furlough scheme it replaces.
Paul Johnson, director of the IFS think tank, said: “The Chancellor is trying to plot a difficult path between supporting viable jobs while not keeping people in jobs that will not be there once we emerge from the crisis.”
Loans and repayments
The Chancellor has extended the availability of Bounce Back Loans, Coronavirus Business Interruption Loans, Coronavirus Large Business Interruption Loans and the Future Fund until 30th November 2020. Other measures include:
- Businesses will get more time to pay back emergency loans and tax bills. More than a million companies which took out Bounce Back Loans will be allowed to pay them back over 10 years instead of six under a ‘pay as you grow’ plan.
- Firms will also be able to take advantage of interest-only repayments for up to six months and be able to take payment holidays for the same period of time, once they have made six repayments.
- In addition a new payment scheme will give more breathing space for more than £30 billion of deferred VAT payments, allowing companies and VAT-registered sole traders to make 11 interest-free payments in 2021-22 rather than a lump sum at the end of March.
- The temporary 15 per cent VAT cut for tourism and hospitality that took the rate from 20 per cent to 5 per cent will be extended until the end of March.
Self-Employment Income Support Scheme
The Government will cover 20 per cent of the earnings of self-employed people after the current scheme runs out (which covers 80 per cent of earnings). Other measures include:
- Self-Employment Income Support Scheme Grant (SEISS) has been extended, with a lump sum to cover November 2020 to January 2021.
- It will be worth 20% of average monthly profits, capped at £1,875.
- Second grant is available for February 2021 to April 2021.
Andy Chamberlain, the director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), said “The help misses out around 1.5 million people who have been given far too little support through the crisis. Limited company freelancers and the newly self-employed almost entirely missed out on support in the last lockdown and have faced bleak months of financial devastation. Now they face a dark winter ahead unless the government does more for them. The 20 per cent cap on support is likely to prove insufficient for many.”
Choosing to continue to support the incomes of workers and businesses through the hugely uncertain next six months is the right decision. However, getting the design of the scheme right will be imperative to avoid layoffs.
At best it may help businesses survive through the winter. At worse, it could just be delaying the inevitable cliff edge. Either way, the next six months will be yet another test for many as the Coronavirus Storm continues.
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