The true implications of the Job Support Scheme for payroll

29th Oct 2020
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Keeping the UK workforce in employment has been a huge task over the course of the Covid-19 pandemic. And the UK government’s Coronavirus Job Retention Scheme – or the ‘furlough scheme’ as we’ve all come to call it – has been a lifeline for many businesses.

But with £47bn spent on the furlough scheme, Rishi Sunak, the UK Chancellor, made the decision to close the scheme in October 2020, replacing it with a new Job Support Scheme that was due to commence on 1 November 2020. However, the start of a second England-wide lockdown has prompted the Government to extend the existing furlough scheme until December – pushing back the start date for the Job Support Scheme

So, how does the Job Support Scheme (JSS) differ from the furlough scheme? And how is this new scheme going to impact on your clients’ payroll and cashflow position?

How does the Job Support Scheme differ from furlough?

The original furlough scheme covered the cost of 80% of each employee’s wages, while businesses were in lockdown or trading with a skeleton staff. As the cost of this over a prolonged pandemic became apparent, the furlough contributions changed. Employers were asked to pay Employer National Insurance Contributions (ER NICS) from August onwards and the Government’s contributions dropped to 70% of wages from September and 60% in October. 

Note: contributions have now returned to 80% for the month of November, with the extension of the furlough scheme.

The JSS differs from the furlough scheme in some significant ways:

  • Government contributions will be smaller – The Government will contribute less, meaning there’s pressure on your business clients to cover their employees’ wages.
  • Employees will work part-time – the aim of the JSS is to avoid redundancies by keeping staff on, reducing their contracted hours down to part-time hours.
  • Companies in lockdown get more – if your client’s business is forced to close during a Tier 3 lockdown, the Government’s contribution will increase to factor in this shutdown.

How the Job Support Scheme works

The JSS now includes two different formats, one intended for staff that are being asked to work part-time, and one intended for staff that can’t work due to local Tier 3 lockdowns. There’s also the Job Retention Bonus to factor in as well, if clients can keep staff on until 2021.

Part-time Job Support Scheme:

Employees must work at least 20% of their usual hours  ⇠Employer pays 4% of wages  Government pays 49% Employee’s pay drops by 27%
Tier 3 Lockdown Job Support Scheme:
Government pays 67% of wages (if the business is forced to close due to a Tier 3 local lockdown order)
Employee’s pay drops by 33%

Job Retention Bonus:

Employers can claim £1,000 in government support for every employee they successful keep in employment until 31 January 2021 – to be claimed in February 2021

Knowing if a client has a ‘viable’ business

One of the key aims of the JSS is to help ‘viable businesses’ survive by keeping their workers on the payroll. But what does that actually mean? 

We spoke to Jonathan Gaunt, founder of the Bristol-based accounting firm FD Works, and a BrightPay user, and he believes it’s important to see the JSS as a support scheme for viable companies, not a bailout scheme:

“With the Job Support Scheme, there’s a much larger commitment that the employer has to make. For this to be successful, the work has to be there in the future. It’s a helping hand, but there must be an element of optimism and a light at the end of the tunnel.

The scheme’s there to support viable businesses, it’s not there to support all businesses. To know if a client is viable you need projections and forecasts, and most businesses are not good at doing those projections. I think there are likely to be two extremes; 1) Those that have done the modelling and are confident, and 2) Those that use the scheme and dig themselves into a hole that’s difficult to get out of.”

Having the right support from your payroll software

Helping viable clients apply for the JSS is going to involve some complex calculations. And there’s likely to be issues around how you account for the hours worked, how you deal with holiday pay and sick pay etc. and how this all works when it comes to paying the employee through your usual payroll run for the client.

At BrightPay, we’re aiming to have new JSS functionality built into the payroll software ASAP. Full guidance from HMRC on how to apply the JSS is still somewhat sketchy, but having the data you need in your accounting platform and payroll software will be a lifesaver. 

With a solution like BrightPay in place, the job will be a whole lot easier. BrightPay Connect also gives you a cloud-based payroll portal so clients’ employees can check what they’re being paid and can see their online payslips etc. from any device.

Helping clients get through the next few months is likely to be challenging, but with BrightPay as your payroll foundation stone, you’re one step closer to giving clients the confidence they need.

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