The Coronavirus Job Retention Scheme (commonly referred to as the furlough scheme) will come to an end on 31 October. It will be replaced in November by a new “Job Support Scheme”.
While detailed information has not yet been released, the key features of the new scheme include:
- An employee will need to work at least one third of their usual hours (although this might increase towards the end of the scheme). This is a significant departure from the old furlough scheme where an employee initially could not work at all (albeit flexibility was introduced from July).
- For the time that they are not working, an employee will receive two thirds of their usual salary (subject to a cap). One third of this will be paid by the Government, the remaining third will be paid by the employer. Unlike in the early stages of the furlough scheme, the Government will not provide pension contributions or employee national insurance contributions. The idea is that an employee will always receive at least 77% of their normal wages (the combination of one third at full pay and two thirds for the time when they are not working)
- The Government’s contribution will be limited to £697.92 a month. In other words, high earning employees will not necessarily receive two thirds of their salary for the time that they are not working
The Government advice states: “Our expectation is that employers cannot top up their employees’ wages above the two-thirds contribution to hours not worked at their own expense.” It is not clear what this means. It is possible that, unlike with the furlough scheme, employers will not be allowed to top up employees’ salaries to 100%. It is also not clear whether employers will be able to/obliged to make up any shortfall for high earners who will lose out as a result of the £697.92 cap on Government contributions.
All small and medium sized businesses will be eligible to use the scheme; however, larger businesses will need to meet a “financial assessment test”. This will involve showing that their turnover is lower now than it was prior to the onset of the pandemic. More detail on other elements of this test will follow. The Government has implied that the scheme will not be available to large companies that are currently paying dividends or carrying out share buybacks.
The new scheme will only be available to employees of qualifying companies for whom an employer has submitted a Real Time Information (RTI) submission on or before 23 September 2020. A similar provision existed at the beginning of the furlough scheme. As RTIs are usually only submitted the first time an employee is paid, some employees who started work in September will lose out.
Unlike the furlough scheme, an employee cannot benefit from the Job Support Scheme if they are under notice of redundancy.
An employee does not have to have been furloughed before to benefit from the new scheme.
When is the scheme available?
The Government has said that the scheme will be open from 1 November 2020 to the end of April 2021. Employers will be able to make a claim online through Gov.uk from December 2020.
This scheme, while a relief to many, is notably less generous than the furlough scheme. The clear difference is that this new scheme is designed only to protect viable jobs. Under the furlough scheme, an employee could continue to receive payments when their role was clearly redundant. This will be unlikely under the new scheme as an employer will be responsible for a considerable part of an employee’s wages. While this scheme is designed to save jobs, sadly we expect significant redundancies to occur as a result of the ending of the furlough scheme.