Stephanie Hammond, director of accounts at Beatons, looks at the impact the end of the Job Retention Scheme will have on UK employees.
On the 20th March, three days before a national lockdown commenced, the government announced its Job Retention Scheme.
Since then, almost ten million jobs have been furloughed with more than 1.2 million employers using the scheme as of the 18th October.
By announcing the furlough scheme before lockdown, the UK government intended to reassure people that jobs and livelihoods would be protected.
And for over four months, the government provided payroll employees with 80% of their normal earnings as the country sought to fight off the threat of coronavirus.
But the scheme is now set to come to an end while the threat of coronavirus lives on. So, what happens next to keep job losses to a minimum?
Enter the Job Support Scheme
As the name suggests, the Job Retention Scheme was the government’s attempt to help people keep their jobs.
The upcoming Job Support Scheme however, is designed to support those still in work that may have experienced depressed hours or a reduced demand for work.
Employees will need to work 20% of their usual hours (one day a week) in order to qualify for government support. The government will then pay 62% of a worker’s missing hours and employers only need to contribute 5% of these missing hours.
That means that if someone was being paid £587 for their unworked hours, the government would be contributing £543 and their employer only £44.
On top of this, employers will receive the £1,000 Job Retention Bonus for every employee they brought back off furlough.
Unlike the initial phase of the Job Retention Scheme the grant under the Job Support Scheme does not cover employer National Insurance and pension contributions which will need to be paid by the employer.
What about the self-employed?
The Self-Employment Income Support Scheme (SEISS) grant was similar to the furlough scheme in that it was based on 80% of average monthly trading profits.
From November, the self-employed experiencing reduced demand due to COVID-19 but who are continuing to trade, or those who temporarily cannot trade, will be entitled to two taxable SEISS grants to support those. This grant was originally planned to only apply where businesses were still actually trading despite the Coronavirus virus but thankfully for many who were unable to even partially resume trading, they will now potentially be eligible for this support.
This will be available to anyone who was previously eligible for the SEISS grant one and grant two and meets the eligibility criteria and constitutes 40% of their income over a three-month period - to a maximum of £3,750.
The second grant will cover the three-month period from February to April 2021 and the rate of support will be announced later.
The positives
Those who feared that a Winter version of the furlough scheme would see the original 80% contribution nosedive may be pleasantly surprised by the recent upscaling to the Job Support Scheme.
With employers paying employees for their time worked as well as contributing 5% of their missing wages, the government’s contribution means that employees will receive at least 73% of their normal wages.
Employers are able to retain their talent while the government’s recently improved contribution to missing hours offers protection to firms that have experienced depressed demand and reduced income.
The Job Support Scheme also extends to businesses that have been forced to close due to local or national coronavirus restrictions.
Employees from businesses in Tier 2 restricted regions will receive at least 73% of their normal wages as long as they are working at least 20% of their normal hours.
Employees from businesses in Tier 3 restricted regions will receive 67% of their normal wages paid by the government, with no contribution from employers, up to the cap of £2,100 per month.
The drawbacks
One of the most common criticisms of the Job Support Scheme points to Chancellor Rishi Sunak’s declaration that ‘not every job can be saved’.
Employees in the events, hospitality and creative industries have seen demand for work plummet or disappear entirely. In the new scheme, if they cannot work at least one-fifth of their usual hours, they do not qualify for support.
Such workers may feel abandoned, even more so following the government’s recently-pulled advertising campaign that encouraged workers to ‘rethink, reskill and reboot’.
After self-employed workers waited from March until May for the first SEISS grant applications to open, their clamour for improved support has certainly not been answered by the Winter Economy Plan.
A grant of just 40% of average monthly profits is unlikely to be enough to see some freelancers through what has already been touted as a difficult winter for the UK economy.
As the UK steps up its economic recovery from months of unparalleled financial support from its government, the continuation of that support in a difficult climate indicates that our leaders are doing whatever they can to keep businesses afloat. Despite this, the Job Support Scheme is one of the first genuine recognitions of the unfortunate reality that not every job can be saved.