Yesterday, the Chancellor announced significant changes to the Job Support Scheme (JSS), which will have a positive effect on many businesses affected by the pandemic.
As a reminder, the old scheme required employees to work a minimum of a third of their normal working hours, which the employer would pay as normal and then any hours not worked would be subsidised by the government; the employer and the employee in equal parts (one third each). The employer would be responsible for paying all pension and NI contributions associated with all paid hours.
So, as a minimum, if the employee worked 33%, then there would be a 67% short fall in normal wages. Of this 67%, the shortfall would have been shared: the government 22%; the employer 22% and the employee would have been unpaid by 23%. Meaning that the employee would have received a minimum of 77% of normal pay and that you as an employer would have been responsible for paying 55% of normal hours, plus the NI and pension contributions for the 77% of hours.
The new scheme requires employees to work a minimum of 20% of their normal working hours, which the employer will pay as normal. For the remaining 80% of unworked hours, the employer will be obliged to contribute 5% (4% of total normal hours); the government 62% (49.6% of total normal hours) and the employee will be unpaid for 33% (26.3% of total normal hours). This means that the employee receives a minimum of 73.6% of normal pay under the scheme.
The government contribution is capped at £1,541.75 (gross) per month.
The scheme is available to all regions, not just those in higher COVID alert areas. For those businesses instructed to close by law, they are still able to claim 67% of wages without the requirement for employer contribution.
All other criteria associated with the original scheme remains the same, including that all claims will be paid in arrears, so it’s worth considering this in terms of cash flow.
We have put together some illustrations of what the cost implications would be to you as an employer when using the scheme, and without. So that you can make an informed decision that is best for your business.
As a reminder, the scheme supports short-time working.
Costs when NOT using the Job Support Scheme
|Costs||100% hours worked||50% hours worked||20% hours worked|
|Employer Pension Contribution||£60.00||£30.00||£12.00|
|Employer NI Contribution||£174.98||£36.98||£0.00|
Costs when using the Job Support Scheme – based on 20% of hours worked
|Gross Pay for 20% of hours worked||£400.00|
|Employer Pension Contribution for 20% of hours worked||£12.00|
|Employer NI Contribution for 20% of hours worked||£0.00|
|TOTAL NORMAL COST FOR 20% OF HOURS WORKED||£412.00|
|The remaining unworked 80% of normal hours is split between the Employer (4%); JSS (49.6%) and Employee (26.3%)|
|Employer Contribution – 4%||£80.00|
|Additional Employer NI (based on 49.6% JSS & 4% Employer Contribution)||£102.12|
|Additional Employer Pension Contribution (based on 49.6% JSS & 4% Employer Contribution)||£32.16|
|TOTAL ADDITIONAL COSTS||£214.28|
|TOTAL COST TO EMPLOYER||£626.28|
From this, you can see that it costs the employer £214.28 (52%) more to use the scheme in this scenario than not to.
Costs when using the Job Support Scheme – based on 50% of hours worked
|Gross Pay for 50% of hours worked||£1000.00|
|Employer Pension Contribution for 50% of hours worked||£30.00|
|Employer NI Contribution for 50% of hours worked||£36.98|
|TOTAL NORMAL COST FOR 50% OF HOURS WORKED||£1066.98|
|The remaining unworked 50% of normal hours is split between the Employer (2.5%); JSS (31%) and Employee (16.5%)|
|Employer Contribution – 2.5%||£50.00|
|Additional Employer NI (based on 31% JSS & 2.5% Employer Contribution)||£101.71|
|Additional Employer Pension Contribution (based on 31% JSS & 2.5% Employer Contribution)||£22.11|
|TOTAL ADDITIONAL COSTS||£173.82|
|TOTAL COST TO EMPLOYER||£1240.80|
From this, you can see that it costs the employer £173.82 (16.29%) more to use the scheme in this scenario than not to. But the more hours that are worked, the more cost effective it is for the employer.
In both scenarios the costs are higher than if you simply placed the employee on short-time working and paid them only for the hours worked. But it is a significantly enhanced package than that offered previously.
*These figures are an illustration based on the information we have available of the scheme at this present time. They may be subject to change as more information becomes available.