A restaurant owner laments the closure of her business
The new version of the Job Support Scheme has been thoroughly welcomed by business but there is no shortage of questions about how it will be applied from employment experts, writes Adam McCulloch.
Although it is supposed to kick-in at the beginning of November, full details of the original Job Support Scheme (JSS) are yet to be published, but it has already been “expanded” twice.
It is extraordinary to recall that as recently as September Prime Minister Boris Johnson and chancellor Rishi Sunak were adamant there would be no extension of the coronavirus Job Retention Scheme. In July, Johnson said that furlough kept people “in suspended animation. You are stopping them from actually working. I am being absolutely frank with you, we are pushing it out until October but in the end you have got to get the economy moving.”
As recently as September he told parliament that people on furlough were “languishing out of work” while Sunak announced in response to better than expected employment figures: “… the furlough scheme has done what it was designed to do – save jobs and help people back to work, where they want to be.” He had previously said the scheme could not go on indefinitely: “It’s not sustainable”.
That may be so, but now look where we are. It is not as if a cavalcade of politicians, scientists, economists and business leaders had not been telling the government throughout the summer and early autumn that they had better make plans to extend schemes given the threat still posed by Covid-19.
The latest iteration of the Job Support Scheme sets out to give open businesses in difficulty extra help to keep staff on by cutting business contributions to wages to 5%. Business grants will be expanded to cover firms in particularly badly affected sectors in high alert level areas and grants for the self-employed doubled to 40% of previous earnings.
It will apply to the whole UK although Scotland, England and Wales are using different grading systems to designate areas at various levels of risk.
When originally announced, the JSS – which comes into effect on 1 November – saw employers paying a third of their employees’ wages for hours not worked, and required employers to be working 33% of their normal hours.
Then a fortnight ago, Rishi Sunak expanded the scheme so that, for busineses forced to close because of Covid restrictions, for example pubs in tier 3, the government would step into cover 67% of employees’ wages, despite them doing no work. In doing so he reintroduced furlough.
The 22 October announcement reduced the employer contribution to those unworked hours to just 5%, and reduces the minimum hours requirement to 20%, so those working just one day a week will be eligible. That means that if someone was being paid £587 for their unworked hours, the government would be contributing £543 and their employer only £44.
Employers will continue to receive the £1,000 job retention bonus for any staff the keep on until at least 31 January.
Coming on the heels of fierce arguments over the support for firms and workers in tier 2 and tier 3 areas, many in the employment world welcomed the changes but there is still the sense that the country seems unprepared, despite multiple warnings, and that massive economic decisions are being made on the hoof.
Employment specialists share their views.
Where’s the detail?
Mark Hammerton, employment partner, Eversheds Sutherland:
Today’s announcement will be very much welcomed by employers in restricted category tier 2 who can open but who have seen a substantial drop in demand. New measures include a new grant scheme, through which local authorities will be able to provide direct cash grants to businesses in their area but with every business in hospitality, retail and hotels being entitled to £2,100 for every month in which they are placed under tier 2 restrictions. Importantly, access to these grants will be backdated to August but they are likely to be more material to smaller businesses.
Will there be any consistency over how local authorities allocate the new grants? What threshold of adverse impact will be required and what evidence will employers have to provide? How will “large” employers be defined?” – Mark Hammerton, Eversheds Sutherland
Furthermore, the Job Support Scheme is being extended yet further (a third iteration) to allow tier 2 employers access to the scheme where employees can work 20% or more of usual hours, in which case employers will pay just a 5% contribution to the wage costs during the remaining unworked hours (rather than a third). For some employers, they may have insufficient work to provide even at the reduced 20% of normal hours.
Being agile in the face of the significant challenges the virus continues to present is essential if the government is to mitigate the worst effects for employers. However, clarity of message is also key. Full details of the original Job Support Scheme are yet to be published, despite its impending commencement but, within a very short time frame since its announcement on 24 September, the scope of the scheme has been extended twice, to provide specific financial support for businesses forced to close during “lockdown” restrictions and, today, those who are not closed but are struggling nonetheless.
What employers need now is certainty over how these respective support mechanisms will operate and inter-relate. For example, will there be any consistency over how local authorities allocate the new grants? What threshold of adverse impact will be required (which could be complex in group structures) and what evidence will employers have to provide? How will “large” employers be defined?
Will businesses that are able to stay open but have lost much of their trade still be able to access sufficient support once the Job Retention Scheme ends? The intent of the Treasury and its willingness to flex to changing circumstances is to be welcomed but the fine detail is urgently needed so that employers know exactly what assistance they can access and how.
While businesses that are forced to close have some indication of what they might expect, pending clearer detail on today’s announcements many outside of that group are still wondering how much help may be afforded to them too; information on which crucial business decisions are currently being made.
Sunak doesn’t go far enough
Tony Wilson, director of the Institute for Employment Studies:
For the most disrupted sectors under the tightest tier 2 and tier 3 restrictions, the changes announced today may still not go far enough. We estimate that at least half a million jobs were furloughed in hospitality and the arts in tier 2 and 3 areas, and many of these employers may well struggle to bring workers back for the minimum one day a week required under the scheme. If they can’t do so, or can’t afford to pay them for that time, then they may still have no choice but to lay workers off. So we would urge the government to use its discretion to waive the hours requirement in the most disrupted sectors in higher-alert areas.
Many questions to be answered
Alan Price, CEO of BrightHR:
Another day, another important government announcement about coronavirus. With just under two weeks to go until the scheme is set to be rolled out across the UK, it seems that the chancellor has listened to businesses’ concerns.
Today’s amendment to the scheme focuses on companies that can remain open despite coronavirus restrictions, such as those in tiers 1 and 2 or those in tier 3 which have not been told to close entirely. As before, employees will still need to work for a portion of their normal hours, with the government and their employer funding their wage for some of the time they do not work.
Applying to all businesses across all three tiers, the chancellor’s announcement now means that companies will need to contribute less to the scheme than expected previously, with the government instead covering most of the bill from their end. Employees will also need to work fewer hours to qualify for it.
This will likely come as welcome news for businesses, helping them to keep their wage costs further down as government support is ramped up. It does also offer more incentive to employers to keep staff on, with their employer needing to provide them fewer hours in which to work. Again, the government’s focus does seem to remain on preserving as many jobs as possible during the winter months.
All eyes will now turn to the government to finally release detailed guidance surrounding the use of the scheme, which will hopefully clarify many of the questions that still need to be answered. In the meantime, employers should carefully consider if this announcement will provide them with the life-line they required, or if even with these changes the scheme simply will not help them to the degree they need and alternatives, such as redundancies, are necessary.
Jonathan Geldart, director general of the Institute of Directors:
There continues to be a glaring gap. The exclusion of small company directors, a major part of the dynamic entrepreneurial heart of our economy, from key support schemes becomes all the more pressing as the virus wears on. It’s deeply frustrating that this issue still hasn’t been addressed.
A vital breathing space
Caroline Harwood, employment tax partner at Crowe UK:
Many have voiced concerns over the inconsistencies in the government’s pre-existing measures. Businesses legally required to close in tier 3 areas were benefitting from the support of the expanded Job Support Scheme, while those in tier 2 areas were suffering significantly from reduced footfall and limited support from the original Job Support Scheme. In many cases, this would not have been sufficient to enable employers to keep staff in jobs.
“These measures will provide vital funding, enabling many to keep staff in jobs – a vital breathing space.
Has Christmas been saved?
Rhys Wyborn, employment partner at law firm Shakespeare Martineau:
While there may still be jobs that employers consider not ‘viable’, which can’t be saved even with this additional support, this is certainly a step in the right direction.
With grants for businesses in hospitality, leisure, and tourism being backdated to August, businesses under restrictions can claim up to £4,200 from today. Similarly, doubling the grant support for self-employed workers could provide a lifeline for the winter period.
However, employers have already faced challenges in navigating their way through the various schemes and rules that the government have introduced during this pandemic, and this will do little to simplify matters. Reviewing and fully understanding the support available is essential for all business owners who think they may be able to benefit. After doing so, they will be more able to make informed decisions about which roles can be preserved in their organisations.
The chancellor may well have just saved Christmas for ‘open but struggling’ businesses, large and small.