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When Should Employers Use the Job Support Scheme?

On Thursday 24th September 2020, the Chancellor, Rishi Sunak, announced a new scheme to support employees and employers when the current Coronavirus Job Retention Scheme comes to an end on 31st October 2020.  The new scheme is the Job Support Scheme (JSS) and the purpose of this guidance note is to provide some information about this new scheme.

When using the Job Support Scheme, businesses will have to pay employees for non-working hours. This article provides insight into why a would company might do this and what the alternatives are.

The Chancellor has been clear that the purpose of the Job Support Scheme is to save “real jobs”. The scheme is designed so that companies, as well as the government, pay employees for hours not worked if the employee is on reduced hours.

There are scenarios where this makes good business sense. There are other scenarios, however, where an alternative course of action would be the more economically viable option.

We strongly advise you get in-touch with us on 0203 319 1649 to get expert, tailored guidance before you take any actions.

What’s the current position with the Coronavirus Job Retention Scheme (CJRS)?

Before we start to explain the new scheme, we thought it worthwhile to remind you of the current status of the CJRS.

The CJRS initially covered the cost of 80% of a furloughed employee’s salary up to a maximum of £2,500 per month.  In addition, it covered the employer’s national insurance contribution and the employer’s statutory pension contribution.  The scheme started to change from the 1st September 2020.

From 1st September 2020, the furloughed employee continued to receive 80% of the salary up to a maximum of £2,500 per month but the employer could only claim back 70% of that payment, and also became required to pay the employer’s national insurance contribution and the employer’s statutory pension contribution.

The scheme changes again on 1st October 2020, the employer will be able to claim back only 60% of this amount and has to pay the employer’s national insurance contribution and pension, whilst the furloughed employee continues to receive 80% of the salary up to a maximum of £2,500 per month.

With this latest change to the scheme, the employer may be carrying up to 25% of the 80% financial burden of furloughed employees.

What is the Job Support Scheme?

The Chancellor has been clear that the purpose of the Job Support Scheme is to save “real jobs”.  The position is that the government can no longer protect jobs that would not exist if it were not for the CJRS.  There’s an acceptance that not every job can be saved.

Under the new scheme, an employee needs to work at least 33% of their contracted hours.  The employer is responsible for paying them for those hours worked, plus 33% of their unworked hours.  The scheme will also cover 33% of the unworked hours, and the employee will be unpaid for the remaining 33% of their unworked hours. 

Here is a worked example:

  • An employee is contracted for 40 hours per week and is paid circa £577 per week (£14.43 per hour / circa. £30k pa).
  • The employee now works 13 hours per week; this leaves 27 hours unworked.
  • For the 13 hours worked, the company pays the employee £188 (13 x £14.43).
  • Of the 27 hours not worked, the company must pay for 33% of these (9 hours) and the government will pay 33% as well.
  • So, the unworked hours cost the company £130 (9 hours x £14.43), and the government contributes the same.
  • The employee therefore receives pay for 31 hours, which is £448 (£188 + £130 + £130), equivalent to 80% of their normal weekly pay.

In this example, it is important to note that the company is paying the employee for 9 hours per week that the employee is not working.

So, with the Job Support Scheme, I’d be incurring the cost of 9 hours during which the employee is not working.  Why would I do that?

This is the very question that we asked ourselves when the scheme first came out.  We really couldn’t understand why any business would make use of the scheme.  If you have 13 hours of work per week, why would you not just employ someone for 13 hours?  Why would you incur the cost of someone for 22 hours if you only need them for 13 hours?

The reality is, it will come down to the skill of the individual and whether you feel that it is worth incurring some cost in order to ensure that you retain that skill within your business.  

We’ve already had a conversation with one client who is considering accessing the scheme for this exact purpose: They have employees who are highly skilled but for whom there is limited work right now; come the new year, however, it’s very likely that these individuals will be needed.

They have an option to make the individuals redundant now and then re-hire when they get busy, but this is risky.  It’s historically been difficult to find the skillset of these individuals, so it may very well be worth the investment that the business will need to make through the Job Support Scheme in order to keep the employees ready for when things pick-up.

But can’t I just reduce an employee’s hours and not use the Job Support Scheme?

Yes.  This is an option that you could choose to explore instead. 

If an employee has less than 2 years’ service, and providing you are in no way discriminating against an individual, you could theoretically say to someone “Here’s the choice – you can reduce your hours and stay employed or unfortunately we’ll need to end your employment with us”.

If an employee has more than 2 years’ service and you have a short-time working or lay-off clause in your contract, then you could look to exercise that clause.

If an employee has more than 2 years’ service and you don’t have a short-time working or lay-off clause in your contract, then you could still consult with individuals around reduced hours.

These are all options that are open to you, but these conversations will now be far harder for employers as employees will be aware of the JSS and will struggle to understand why they are not being placed on that scheme.  Under that scheme, they will be better off as they will receive payment for 66% of their unworked hours.  If they agree to your request to reduce their hours, then they will only receive payment for hours worked.  This will make for very difficult conversations.

Will anyone really use this scheme?

Here’s where we think business will use the scheme:

  • If an individual is currently part-time furloughed. In this scenario, the employer is already carrying the cost of hours worked and from 1st October 2020 they are also paying 25% of the cost of the unworked hours so, really, the new scheme leaves them in much the same position and therefore we think it’s likely that those people who have been part-time furloughed will be transferred to the JSS.
  • If an individual has a unique skillset. It’s possible that businesses will use the scheme where retaining a particular skillset within the business is important.  In this scenario, a company may well decide that the cost is worth it.
  • Social responsibility. It could be that a business can afford to pay for the unworked hours, believes it to be the socially responsible thing to do, and will therefore choose to access the scheme.

What this means is that we think the scheme is likely to protect the “real jobs” as it is designed to do.

Employers will have some tough decisions to make as to whether they try to find work for individuals and carry the cost of 33% of their non-working hours, or whether those roles are surplus to requirements.

What are the legal implications if I choose not to use the scheme?

There is no clear answer to this at the moment as there is no case law.

Under UK employment law, in a redundancy situation you are required to consider viable alternatives to redundancy.  We suggest that one of the alternatives that you should consider is accessing the Job Support Scheme.  This does not mean that you are obliged to use the scheme but we do believe that you are obliged to consider it and to explain to any employees who are at risk of redundancy why it is that you do not see the scheme as a viable alternative to redundancy in a particular situation.  There will be solid reasons as to why it isn’t appropriate but communicating and documenting these will be very important.

If you are considering redundancies, then we do suggest you seek professional support before you start the process.

You can find out more about how we can help you manage redundancies here: https://lighterhr.co.uk/hr-strategy-change/redundancy-support/

We have also written a guide to redundancies which you can find here:

How To Make Someone Redundant - Lighter HR

If you’d like help with the Job Support Scheme or other Coronavirus matters, contact us on 0203 319 1649 or fill in the form below.

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Employee Issues? | Our Expert HR Consultants Can Help You | Lighter HR

If you’d like help with the Job Support Scheme or other Coronavirus matters, contact us on 0203 319 1649 or fill in the form below.

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