Top 4 Pitfalls of the New Job Support Scheme
Before leaping into the pitfalls of the new Job Support Scheme (and why your clients will lose out), I am going to clear up some of the confusion about what it is.
What is the Job Support Scheme?
The new Job Support Scheme was announced by the government in September, and it is designed to top up the wages of employees unable to work full-time because of coronavirus restrictions over the winter. Employers using the Job Support Scheme will also be able to claim the Job Retention Bonus if they meet the eligibility criteria.
Businesses will continue to pay their employees for time worked, but the burden of hours not worked will be split between the employer, the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
The scheme will open on 1 November 2020 and run for 6 months, until April 2021.
To ensure you are able to best advise your clients on the new scheme we want to highlight the main pitfalls.
Four Pitfalls of the Job Support Scheme
It’s far less generous than the current Job Retention Scheme - The Government contribution will be capped at £697.92 a month compared to the initial £2,500 plus associated Employers’ National Insurance and pension contribution under the Job Retention Scheme placing a greater responsibility on the employer to fund employment costs. In fact, under the scheme the government never pays more than 22% of the employees' overall salary.
The employer ends up paying more in wages than the hours they get in return - The percentage cost to the employer far outweighs the percentage of productive hours provided by that employee to the business and a stark reality is that it costs more than 50% more to employ several people working 40% of the time compared to fewer people working full time.
Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee. Therefore, employers face the dilemma now of assessing demand for the forthcoming months for their business and making decisions about the number of employees required.
Job Support Scheme payments will be made monthly in arrears commencing in December, reimbursing the employer for the government’s contribution. The grant will not cover employer NICs or pension contributions, but these contributions will remain payable by the employer. This means that the overall cost of employment for employers is higher than simply their contribution to employee salaries.
Sadly, it does not appear that the Job Support Scheme will avoid a rise of redundancies over the coming months as employers seek to manage their cashflows to survive the winter months. Join our latest webinar to find out more about the New Job Support Scheme and whether it’s right for your clients. These webinars are incredibly popular and our COVID-19 series has achieved 99.4% customer satisfaction, so register now to secure your place.
Webinar: New Job Support Scheme Explained
18th November – 10.30am
In this webinar, we look at what you need to know about the new Job Support Scheme, including which employees are eligible, why you clients will lose out, the level of government funding, and how the scheme is actioned through payroll. Whether you use BrightPay or not to run your payroll you are more than welcome to join. We will also explore the rise in redundancies and the new changes regarding statutory redundancy and notice pay for furloughed employees. Register now.
What you'll learn:
- Everything you need to know about the Job Support Scheme
- Which employers and employees are eligible
- How to operate the Job Support Scheme
- How BrightPay’s Job Support Scheme Calculator & Claim Report works
- How to calculate notice pay and redundancy pay for furloughed employees
- How to keep in touch with employees on reduced hours