Employers should NOT use the Job Support Scheme

There is zero benefit and a lot of cost for employers. Baffled why any would use it

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Why would any employer participate in this scheme? All the burden of admin claiming and operating the scheme is on the employer, and there is absolutely no benefit no incentive and only cost to the employer for doing so. It is great for the employee. In the example below the employee works 40% hours for effectively 80% of normal pay. They love it. But the employer is much much worse off. So why would they possibly consider claiming under the scheme when all it is going to do is put them further out of pocket.

A lot of struggling employers (especially in the hospitality industry - cafe's, restaurants, hotels) want to bring back some staff. Here is a simple example contrasting employer within the scheme versus employer not using the scheme. Lets look at not using the scheme first:

Employer pays employee 40% of wages for working 40% of normal hours. Cost to employer 40%.

Within the Job Support Scheme

Employer pays employee 60% (40%+20%) of wages for working 40% of hours. Cost to employer is 50% more than not within the scheme.

In addition, the HMRC portal for reimbursing the employer will not be open until December at the earliest. So it seems likely the employer will have to fund both the employer 20% in this example PLUS the government 20% until the reimbursement is obtained. This could mean struggling employers having to pay staff 80% of their pay for working 40% of their hours for up to two months before reimbursement arrives with them. Probably an impossible scenario for any business struggling to pay the basic 40% obligation, never mind the rest.

So, there you have it. Any employer participating is participating in a potentially extremely complex and difficult administrative scheme which will take time and necessarily cost to administer and which will only incur them in further very significant cost.

Truly baffling.

Replies (23)

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By Andy556
07th Oct 2020 11:34

Then the employer loses their most valuable staff who will just go out and work for someone else who respects them more

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RLI
By lionofludesch
07th Oct 2020 11:34

I thought it was carp when I first read about it.

It seems I was correct.

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By psimonparsons
07th Oct 2020 11:55

Some employers maybe. But rather broad to state that no employer should use it. So some dependency on whether employers want to retain their important staff resource, or free them to look for employment elsewhere. So yes, there is a major question of viability and recovery to consider. If the lull in business is seen as occurring for a limited period of time (6 months) then it may be a great help and the employer is able to benefit from the Job Retention Bonus as well (if staff have previously been furloughed).

So all an element of swings and roundabouts.

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By John Isabel
07th Oct 2020 12:13

The OP is of course correct IF:
1) You ignore the legal processes/commercial negotiations involved in just 'making' staff work 40% of hours.
2) You accept the liklihood that staff will either leave ASAP, or harbour resentment during this (unlikely to be lengthy ) remaining period of employment.
3) The employer is either unable, or unwilling, to accept an increased cost to ensure that their staff are retained and able to put food on the table.

There was uproar when Spoons' boss said all his workers should go get other jobs elsewhere, but the OP seems to endorse wholly that approach (in fact i do have a bit of sympathy - people should be encouraged to mitigate their losses. I also, however, think you need to look after your staff).

We tend to employ highly skilled staff and pay them well. Whilst we don intend to use this scheme i suspect we would rather do so than leave staff with a choice between new job, second job, or severe financial hardship.

Edit: Also bear in mind recruitment and redundancy costs if you don't use the scheme. OK so accountancy is a little different as the recruitment costs are often monetary but even if we get a reduced rate with the agency it tends to cost us around £5k to employ someone, plus initial training/bedding in, lower efficiency, etc. Let's say £10k covers a typical training cost. Even without redundancy costs (if the employees refuse to go on short time working etc) It's got to be better to pay 60% of wage for 40% of hours for a few months, with e'ee getting 80% of their normal income. You can make a big deal to the e'ee about how you've stood by them at your own cost and this may help with staff retention in the coming years when you aren't able to be as generous with pay rises as you might have otherwise.

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By kestrepo
07th Oct 2020 12:06

I think that many business will use the scheme. It doesn't look too hard to administer once you have set up an excel sheet - admittedly any toing and froing with hours will be a nightmare. Instead of employers paying for their well trained key and core staff to sit around and do nothing at 100% of pay it offers an alternative to potential redundancies. A key factor for me is how much would it cost to recruit all your staff from scratch again and then train them to the jobs? I admit it is not the one size fits most approach that Furlough offered but at least it is an alternative. I predict redundancies that then leave core and key staff working on reduced hours across the board for many businesses during the winter months.

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By SXGuy
07th Oct 2020 12:19

The only benefit I can see is if the employer has no choice but to reduce employees hours but doesn't want the employee to seek other employment. Could be considered an insentive to keep the employee. Apart from that, I agree there's no benefit.

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Caroline
By accountantccole
07th Oct 2020 12:33

There have to be a lot of jobs where training can run into weeks. Why would you let someone go rather than use the scheme and get some of the salary funded, if the cost of starting again outweighs the downsides of the scheme?
High redundancy costs?
No contracts in short term pipeline but bookings few a few months' time.

I can't see all that many people using it, but there will be some

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Replying to accountantccole:
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By Paul Crowley
07th Oct 2020 13:17

Once the scheme is in place, employer cannot make redundancies. A serious risk on employer

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Replying to Paul Crowley:
Caroline
By accountantccole
07th Oct 2020 15:46

My point was it might be cheaper to ride the wave, carry on paying the employee than deal with a large redundancy payment for a long term employee.
Agree there is a risk element but every employee scenario will be different

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By Matrix
07th Oct 2020 13:02

The problem is that some of my clients want to use it. So I will have to look into it.

One has an employee self isolating at home who could probably do a third of normal hours. They have been paid at 100% and have not worked since March.

Other employers employ children in their 20s who live at home so easier to adjust the hours.

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Replying to Matrix:
RLI
By lionofludesch
07th Oct 2020 15:57

Matrix wrote:

Other employers employ children in their 20s who live at home so easier to adjust the hours.

They'd be the cases I'd be looking at if I were at HMRC.

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Replying to lionofludesch:
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By Matrix
07th Oct 2020 17:02

I think more with furlough than flexi-furlough and the new scheme.

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By Lucy N
07th Oct 2020 13:05

The scheme will work well in the hospitality sector where opening hours have been cut, and staff are completely unable to work their usual hours. It isn't really that difficult to calculate as long as you have a good record of hours worked. I have two pub clients and they will definitely be able to use the scheme. Employer is only contributing 1/3 of hours they haven't worked so not the end of the world, and keeping their staff in a job. Much better now to be paying staff who are actually working.

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Replying to Lucy N:
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By NYB
09th Oct 2020 12:01

I'm in two minds re hospitality sector. Their hours may have been reduced even without all this Covid issue - who knows. I look at my two wine bars. Out of 25 employees 20 are students who have benefited incredibly over the past 7 months. One has even been backpacking round the world somewhere ( she was gone before lockdown and hadnt worked for 4 months then)) but because she was on the payroll still, all the way thru, she has been collecting Furlough month after month.
This employer hasnow decided to rationalise and use as many employees as possible in the normal way & let go the rest. he shudders at trying to operate Job Support.
Every employer is different

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By OldParkAcct
07th Oct 2020 14:41

You seem to think employers can just change the employees hours without consent, fortunately this is not correct. Employees would have the choice of agreeing to the variation of contract or taking redundancy along with full pay for their notice period. From experience over the past few months many employees, certainly those with longer service records, are taking redundancy rather than a revised contract.

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RLI
By lionofludesch
07th Oct 2020 16:30

Any news about whether employers can "top up" wages beyond the minimum one third?

The implication in the blurb was no, but that could have been unintentional.

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By jules66
07th Oct 2020 19:56

We've had quite a few Director only payrolls ask about the scheme. All have been furloughed at some point since March, some now flexibly furloughed.

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Replying to jules66:
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By kar999
09th Oct 2020 11:19

jules66 wrote:

We've had quite a few Director only payrolls ask about the scheme. All have been furloughed at some point since March, some now flexibly furloughed.

I'm sure there'll be some sole Directors doing admin/training/marketing for a third of their time and use this scheme and also qualify for the Job Retention Bonus. Freelancers etc with zero income and enough money in the business will certainly benefit from this scheme.

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Replying to jules66:
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By kar999
09th Oct 2020 11:20

[Snip] Duplicate.

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Psycho
By Wilson Philips
07th Oct 2020 20:23

And how is it going to work where Wee Jimmy has decreed that pubs etc in certain parts of Scotland have to close, where staff cannot work the minimum 33%?

EDIT - ignore that (for the time being). Current furlough rules still in play.

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Replying to Wilson Philips:
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By Matrix
09th Oct 2020 12:34

Apparently there will be new grants for lockdown areas.

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By sally1964
09th Oct 2020 11:36

Depends on how badly the employer wants to keep the member of staff. We have discussed it in the office and can not see many of our employers clients using it. They can not afford to make up the difference to match HMRC. However I can see this causing a lot of upset with staff whom assume they are going to get the extra.

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By Paul Crowley
31st Oct 2020 23:06

Well sod it
I am going to ignore it for a month and keep going with furlough

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