Job Support Scheme Announced In The UK

Vinson & Elkins LLP

Vinson & Elkins LLP

As the United Kingdom winds down the furlough scheme (under which the UK government funded 80% of furloughed employees’ salaries up to a capped amount), employers are looking at next steps, including cost-cutting measures such as reducing the size of their workforces.

In response to the concern that the end of the original furlough scheme will trigger a significant wave of job losses, on 24 September 2020, Chancellor of the Exchequer (the UK’s equivalent to the U.S. Treasury Secretary) Rishi Sunak (the “Chancellor”) announced that the Job Support Scheme will replace the furlough scheme from 1 November 2020, and will run until the end of April 2021. More details are to come about the Job Support Scheme, but here are the key points available so far:

  • Eligibility. The new scheme is available to small and medium enterprises (SME) automatically, but larger businesses will have to meet a financial test. Larger businesses must show that turnover is now lower than before experiencing difficulties from COVID-19. The government has said that large employers that are eligible for the Job Support Scheme should not be making capital contributions, such as dividend payments or share buybacks, while accepting the grant.
  • Previous Grant Coverage. With the original furlough scheme, employees who were fully furloughed would receive 80% of their salary. This was comprised of the employer paying 20% and the government paying 60% (up to £2,500 a month).
  • New Grant Coverage. As of 1 November 2020, to be eligible for the Job Support Scheme employees must work at least a third (33%) of their normal hours. The employer must pay the employee for these hours. The remaining 67% is accounted for with the employer paying 22%, the government paying 22% (up to £697.62 a month) and the remaining 23% being unpaid.
  • Retention Bonus Scheme. Employers can claim under both the Job Support Scheme and the Jobs Retention Bonus Scheme, which gives employers £1,000 per retained employee who the employer claimed for under the previous furlough scheme and who remains continuously employed through 31 January 2021.
  • Redundancy. Employers are unable to make employees redundant while those employees are on the scheme, but are able to make redundant other employees who are not on the scheme.
  • Self-Employed. The Chancellor announced that the government will be extending the self-employed grant on similar terms to the Job Support Scheme.

While full information on the Job Support Scheme has not yet been published, it is important for employers to begin to understand and assess their options. The initial furlough scheme was intended to protect jobs and income of employees, but it is yet to be seen how effective this will be in the long run. The new Job Support Scheme is designed to protect “viable” jobs where employees are able to do some work, so not all employees and industries will benefit, and it is not nearly as generous as the current furlough scheme that it will replace. Despite the government’s efforts, there are still tough decisions ahead for employers.

Adair Cook, a trainee solicitor in our London office, contributed to the development of this article

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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