Well, that was unexpected! 24 September saw the Chancellor Rishi Sunak announce a new scheme to replace the Job Retention Scheme.
The current Job Retention Scheme (JRS) is due to end on 31 October. From 1 November, the Job Support Scheme (JSS) comes into play.
The main differences between the two is that the JSS is to support organisations with the salaries of employees who are working less than their normal contracted hours, as opposed to paying employees who were furloughed and unable to work.
The JSS will be available to all organisations, small and large, and is not related to previous use of the furlough scheme. However, large organisations will be required to undergo a financial assessment before they can make a claim.
So the new scheme is great from the perspective that it helps organisations fund their wage bills, even if people are unable to work their full hours. The downside is that, as furlough ends, employers will be expected to continue to pay NI & pension contributions.
So how will the Job Support Scheme work? The Government will pay one third of any lost hours (i.e. hours not worked) up to a cap of £697.92 per month.
For example,
Employee usually works 5 days a week and earns £600 a week. Under the JSS, they work 2.5 days a week (50% of their normal hours), so the remaining 50% of their hours is considered lost. The employer pays £300 for their 2.5 days worked.
The employer then pays £100 which is one third of the value of the hours lost.
The government also then pay £100 which is one third of the value of the hours lost.
The employee works 2.5 days per week and receives £500.
As you can see, there are similarities between the JSS and flexible furlough (where the employer pays for the hours worked and can claim furlough for the remaining hours).
Challenges
We are still awaiting further guidance on how this new scheme will work in practice, and I guess a lot of it will be trial and error. After all, we've never been in this situation before.
Will the scheme prevent redundancies? Maybe. But realistically, if an organisation is experiencing a downturn in work and is therefore looking at redundancies, paying more for fewer hours might not be viable. Certainly employers should be considering how this scheme influences any ongoing redundancy consultations and ensure that employees are consulted with about the scheme and how it impacts the financial situation of the business.
Remember that consultation means you need to be giving due consideration to every factor which influences your business before you make a decision to dismiss people.
We will keep you updated as we get more guidance through the next week or so.