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Markel Insurance

24 Sep 2020

Furlough’s replacement: The New Job Support Scheme

*Announcement: Updated 12th October 2020*

Since this publication of this article, the Government has extended the Job Support Scheme to apply to business who are forced to close due to lockdown restrictions. For the most up-to-date information, read our latest guidance here.

In his Statement to the House of Commons on 24th September, the chancellor, Rishi Sunak, unveiled the Government’s Winter Economy Plan and the much--speculated replacement to the furlough scheme, which comes to an end on 31st October.  From November, the Coronavirus Job Retention Scheme  (furlough) will be replaced by The Job Support Scheme and will remain in place for six months.

As with the current flexible furlough scheme introduced by the Government in July, under the newly announced Job Support Scheme, employers will receive a subsidy from the Government towards employees’ wages. The employer will be able to offer some work, but reduced working hours, with the employer and the Government topping up a percentage of the unworked hours.

The aim of the new scheme is to provide support to those in ‘viable’ jobs, where the employer can continue to provide a minimum level of work and is financially able to contribute towards the employee’s unworked hours. 

The chancellor announced that this scheme will directly support the wages of people in work, giving businesses who face decreased winter demand the option of keeping employees in a job on shorter hours, rather than making them redundant.

The outline of the scheme is as follows:

  • Employees must be working at least a third of their normal hours and be paid for that work, as normal, by their employer.

  • The Government, together with employers, will increase those people’s wages covering 2/3 of the pay they have lost by reducing their working hours.

  • The Government will reimburse employers 1/3 of the unworked hours (up to a capped amount of £697.92 per month) and the employer will pay 1/3 of the employee’s unworked hours.  

  • Employees using the scheme will receive at least 77% of their pay, where the Government contribution has not been capped.  The employee must not be on a redundancy notice to be eligible for the scheme.

  • Employees who were employed as of 23 September 2020 will be eligible for the Scheme.

  • All small and medium-sized businesses are eligible to apply. But larger businesses are only eligible where they are able to demonstrate that their turnover has fallen.  The Government expects that large employers will not be making capital distributions (such as dividends), while using the scheme.

  • Businesses are eligible even if they have not previously used the furlough scheme.

This scheme will greatly assist employers who have experienced a reduction in business as a result of the coronavirus pandemic, such as those in the hospitality sector who are impacted by the new restricted opening hours but are stillable to guarantee their employees at least a third of their normal hours of work. Of course, some employers will still need to make some tough decisions in the coming months, but the announcement of the Winter Economy Plan provides some welcome support to businesses.

The Winter Economy Plan update in full is available here.

For further advice about furlough and the government’s economic response to COVID-19, please contact Hannah Thomas or call us on 0371 705 4006.

Our COVID-19 Hub contains a range of information and resources to best support our clients during this difficult time. To receive the latest news and insights by email sign-up here.

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