***GOVERNMENT UPDATE - JOB SUPPORT SCHEME***

Updated: Nov 4, 2020

What did the Chancellor announce? A recap...

· A new Jobs Support Scheme will be launched for employees working at least a third of their normal hours, who are being paid for that as normal. The government and employers will jointly increase their wages to cover two-thirds of their lost pay and the employee will keep their job

· All small and medium-sized businesses are eligible, but larger businesses must show their turnover has fallen during the crisis. Employers can use it even if they have not previous used the furlough scheme it replaces

· It will run for six months from November

· The existing grant for self-employed people is being extended on similar terms to the Jobs Support Scheme

· A “pay as you grow” scheme was announced for businesses, allowing them to extend their bounce back loans from six to 10 years, reducing their payments

· Businesses can also move to interest-only payments or suspend repayments for six months if they are "in real trouble". Credit ratings will be unaffected

· The government guarantee on Coronavirus Business Interruption Loans will be extended to 10 years and a new successor loan guarantee programme will be announced in January

· The temporary reduction of VAT from 20% to 5% for some sectors will remain in place until 31 March 2021


How will the Job Support Scheme work? An example...

If an employee works reduced hours the employer pays for that. And in addition, the employer and government pay one-third of the lost pay each (up to the cap).

So for someone on £2,000 a month working half their hours, they’d get £1,000 normal pay plus £333 extra from their employer and £333 from the government.

The employer can also claim the job retention bonus - as long as they qualify for that.

Workers on Job Support Scheme can't face redundancy

Sunak said businesses will not be able to issue redundancy notices to employees on the Job Support Scheme - and there will be restrictions on capital distributions to shareholders.

The chancellor told the Commons: "There will be restrictions on larger companies, in terms of capital distributions to shareholders while they are in receipt of money for their workers on this scheme.

"And indeed they will not be able to make redundancy notices to those workers who are on this scheme throughout its duration."

Government wage contribution falling from 80% to 22%

The maths in the new Job Support Scheme are not especially easy to grasp.

So a helpful way to think about it is the overall percentage of a person’s salary that the government can end up paying for.

For someone who works a third of their standard hours, the government’s contribution would be two-ninths - or approximately 22% (compared with 80% at the beginning of the furlough).

The employer would pay the first third, like normal, and another two-ninths on top. The employee would get nearly 78% of their salary.

The 22% government contribution is a maximum. For someone working 50% of hours, the government contribution is 17%. It’s a sliding scale.

The scheme for self-employed people will also be less generous than previously. It will now be worth 20% of earnings (compared to 80% at the beginning).

So in terms of what the government contributes the two schemes are roughly level.

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