How the new Job Support Scheme will work

  • Describe how the Job Support Scheme will work
  • Describe a drawback of the scheme
  • Identify an alternative for helping struggling companies
How the new Job Support Scheme will work
John Sibley/POOL/AFP via Getty Images

As the dust settles from the Chancellor’s statement last week in which he outlined the further support measures available to UK businesses to assist them through the winter months I take a look at the key announcements.

With the current Job Retention Scheme coming to an end at the end of October and the resurgence of Coronavirus the Chancellor was under pressure to protect jobs.

It is not surprising therefore that his main announcement was the Job Support Scheme which commences 1 November.

While business leaders from the most affected sectors had been campaigning for sectorised support the Chancellor resisted these calls and introduced a scheme available for all small and medium sized businesses and those large businesses who have suffered a fall in turnover because of coronavirus. 

The scheme has similarities to other support schemes used in Europe but crucially is only currently available for six months ending 30 April 2021 and is far less generous than the current Job Retention Scheme.

UK business owners remain starved of certainty over fiscal policy, Brexit and support measures to be able to properly plan for the entire of 2021. While it would have been a bold step introducing a scheme to run to 31 December 2021, it would have helped provide this stability.

The Government contribution will be capped at £697.92 a month compared to the initial £2,500 plus associated Employers’ National Insurance and pension contribution under the Job Retention Scheme placing a greater responsibility on the employer to fund employment costs.

Under the JSS, government will share some of the burden of employment costs alongside the employer and employee.

The scheme is limited to jobs considered to be viable the measure of which is that the employee must work at least a third of their usual hours. It is easiest to see how the scheme works in examples.

The Chancellor’s overall message was that he wanted to protect as many jobs as possible but also that he could not protect every job and every business.

However, for those hardest hit businesses the above measures fall well short.

As can be seen from the examples above the percentage cost to the employer far outweighs the percentage of productive hours provided by that employee to the business and a stark reality is that it costs more than 50 per cent more to employ several people working 40 per cent of the time compared to fewer people working full time.

Clearly not the intention of the chancellor but the responsibility as to whose jobs are protected has been passed to the employer.

This onus is magnified by one of the conditions of the scheme which means employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.

Therefore, employers face the dilemma now of assessing demand for the forthcoming months for their business and making decisions about the number of employees required now, especially with the current Job Retention Scheme ending 31 October.