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The Chancellor of the Exchequer announces new Job Support Scheme for UK employers

Insights / 25-09-2020 / London

To protect the UK economy over winter, which he says will be a “difficult" one, the Chancellor of the Exchequer, Rishi Sunak, confirmed the end of the Coronavirus Job Retention Scheme yesterday. The end of the scheme, which was first introduced in March, will also mark the start of the new “Job Support Scheme” taking effect from 1 November.

Similar to the “Kurzarbeit” job subsidy programme in Germany, the new scheme will give the opportunity - to many UK employers under financial pressure - to keep employees on board, on reduced hours, until matters improve, instead of making them redundant. 

Employees on the Job Support Scheme will be required to work at least one third of their usual working time. Those hours will be paid by the employer in the normal way. The cost of hours not worked will be split between the employer, the Government (through wage support) and the employee (through a wage reduction). The Treasury says this measure means employees on the scheme will receive up to 77% of their pay. However, the level of government grant will be capped at £697.92 per month, which sadly means this scheme will likely only protect the very lowest paid from redundancy.  The Government will reimburse employers in arrears.

Unlike the previous scheme, the new Job Support Scheme will only be automatically opened to Small and Medium-sized Enterprises (SMEs). Larger employers will have to pass a financial assessment showing that, at the very least, turnover is lower than it was before the pandemic. I have trouble believing it will turn out to be as easy as all that for big employers and we await the small print with interest. It is already notable the Treasure announcement suggests that large firms will be expected not to have made any capital distributions, such as share dividends, since the outbreak of the pandemic. 

A key difference from the Coronavirus Job Retention Scheme is that in order for an employer to make an employee redundant, they will have to be taken off the scheme beforehand. The employer will then have to pay notice and statutory redundancy (where applicable) at normal rates of pay.

This new measure is deliberately designed to protect only jobs that will survive the winter and (hopefully) the easing of the pandemic. It accepts that many jobs will be lost as some industries have not yet reopened or reach a sufficient level of activity. As a result, we can expect a flood of redundancy claims between now and Christmas as firms shed roles that cannot be saved.

Martin Pratt was also quoted in the Lexis update on Rishi Sunak’s job support scheme, to read the article click here.

Martin Pratt

Martin Pratt Partner