Yesterday, Rushi Sunak announced that changes would be made to the Job Support Scheme which is to come into effect on 1 November 2020.  

The changes are as follows:

  1. Employees will now only have to work 20% of their normal hours to qualify for the scheme, instead of 33% as originally announced;
  2. For the remaining (up to) 80% of the remaining unworked hours, the government will provide payment of up to 61.67% of the normal wages up to a maximum of £1,541.75 a month (which was previously £697.92) ;
  3. The employer will now only be required to contribute 5% of the unworked hours (not the original 33% that was originally announced).

Let's crunch the numbers.....

There was a significant level of criticism of the first version of the Job Support Scheme as not sufficiently helping employees or business (including from us in our briefings) - the numbers just did not work for most employers.  

Under the 'old scheme

An employee earning a gross of £400 for a 39 hour week would:

  • Work 33% of their hours (13 hours) and receive payment of £133.33 pw or £577.78 per month;
  • Receive two thirds of their remaining wage (two thirds of £266.67) which is £177.78.

Employee receives £311.11 per week (£1,348.15 per month) instead of their normal £400 (£1,733 per month) for working a 13 hour week.

Turning to employer payments:

  • The employer pays  the normal rate for the 33% for the hours worked -  £133.33 per week;
  • They then pay a third of the remaining unworked hours - £88.89 per week.

Employer pays a total of £222.22 per week for 13 hours work.  This means that the hourly rate that the employer pays has increased from £10.26 to £17.09.

It is for this reason that many employers had concluded that it doesn't make economic sense to use the scheme when other options - including making redundancies or asking employees to reduce their hours without using the scheme.

How does the new scheme differ - do the economics work?

Looking at the same example as above, the same employee and employer would be effected in the following way:

An employee earning a gross of £400 for a 39 hour week would:

  • Work 20% of their hours (7.8 hours) and receive a payment of £80 per week (£346.66 per month);
  • Receive two thirds of their remaining wage (two thirds of £320.00) - £213.33 per week.

Employee receives £293.33 per week (£1,271.11 per month) instead of their normal £400 (£1,733 per month) for working a 7.8 hour week.

Under this scheme the employee therefore receives slightly less than before, mainly due to the fact that they are potentially working less hours as they are only working 7.8 hours to receive this payment, whereas they would have been  required to work at least 13 hours to receive £311.11 per week in the 'old' example above.

Turning again to employer payments:

  • The employer pays the 20% for the hours worked £80.00 per week;
  • They then pay only 5% of the remaining unworked hours of £16.00 per week.

Employer pays a total of £96 per week for 7.8 hours work.  This means that the hourly rate that the employer pays has once again increased but at a far lower rate from £10.26 to £12.31.

In order for employer to retain skills and avoid the need to pay redundancy payments, this is therefore a far more attractive scheme than the previous iteration announced only a short time ago.

This scheme is still not as generous as furlough, but is a very significant improvement on the original design of the scheme.  

Template Agreement

We have update our template agreement to reflect these changes to the scheme.  You can access the agreement here.