With less than two weeks to go before it was due to launch, chancellor Rishi Sunak has completely overhauled his new job support scheme, slashing the contribution employers will be required to make and reducing the minimum amount of hours short-time employees are required to work to be eligible.
The revamp was a direct response to calls from businesses that were negatively impacted by local lockdown restrictions but not in a position to access the support made available for firms told to close their doors.
“Hopefully these changes will help reduce employers’ redundancy plans,” says Peter Cheese, chief executive of the CIPD. However, the latest changes to the job support scheme are “very confusing for employers”, he adds, noting that prior to yesterday’s announcement, employers were still waiting on more detailed guidance for the now obsolete iteration of the scheme.
“If you’d got your head round one version, it can be hard to get your head round the new one, so the confusion isn’t helpful,” agrees Gary Cookson, director of Epic HR. “But, I’m not convinced there was another way to achieve this.”
So with employers given just nine days to get up to speed with the new system, People Management takes a look at what’s new and any grey areas created...
How much more generous is the new version of the scheme?
The new scheme provides a much bigger incentive for firms trading below their normal capacity to retain staff on shorter hours, says Torsten Bell, chief executive of the Resolution Foundation. “The revised [job support scheme] will ensure that more people are able to hold on to their jobs throughout the coming months,” he says.
Under the new scheme, employers will only be required to provide 5 per cent of lost wages for the time employees are not working, compared to 33 per cent under the old scheme. The government is now increasing its contribution to 62 per cent to compensate for this, and has doubled its contribution cap to £1,541.75. Similarly, the minimum number of hours an employee needs to work to be eligible for the scheme has been reduced to 20 per cent of their regular hours, down from 33 per cent.
Bell says this will reduce the cost of keeping on a ‘typical’ furloughed worker from £233 a month to just £35 a month. And the Resolution Foundation has calculated that the monthly cost of keeping two employees earning £17,000 a year on at half their normal hours is now just £100 more than keeping one full-time employee – down from a £500 premium under the old scheme.
The scheme does look better on paper, says Cookson. “[But] whether it actually works out as generous involves some complicated mathematics and there are lots of permutations.” he adds.
Which businesses will be eligible to apply, and which should consider applying?
As with the old scheme, all SMEs are eligible to apply regardless of which tier of lockdown restrictions they fall under. “These changes have clearly been implemented with a view to addressing the gap in support for businesses in tier two restrictions, compared with those forced to close in tier three that will benefit from the [extended furlough] scheme,” says Rhys Wyborn, employment partner at Shakespeare Martineau. But, he adds: “These changes are not explicitly tied to that status, and the scheme remains available across the UK.”
As before, the scheme is also still open for larger companies that can show their turnover has been affected by the pandemic – although it is still unclear exactly how this will be measured. “The government has also suggested there will be a restriction on businesses making dividends while using the scheme so that might exclude a number of large employers,” says Laura D’Arcy, employment law partner at BLM.
As for who should apply, Cookson says: “Any organisation that is having to reduce working hours for staff should consider applying.”
How will claiming through the scheme work?
Again as before, the scheme opens on 1 November and will run for six months until April 2021. But, says D’Arcy, “claims cannot be submitted until December, so employers will have to pay employees then wait to be reimbursed.”
Wyborn says guidance is yet to be released on the exact mechanics of the repayment system. But, he says: “We anticipate the online claims system will bear some similarity to the mechanism for claims under the [job retention scheme].” The government has committed to publishing a policy paper with further details, he adds.
Cookson advises the gov.uk website is the best source of up-to-date information. “The scheme should be helpful and stave off redundancies again,” he says. “Although it leaves unanswered questions about what happens when the scheme ends on 30 April 2021.”