When Rishi Sunak announced the Job Support Scheme as part of his Winter Economic Plan, it was to ‘protect viable jobs in businesses who are facing lower demand over the winter months due to coronavirus’.

Employers have to pay the wages of staff for the hours they work, but for the hours not worked, the government and the employer will each pay one third of their equivalent salary.

The theory is sound, and the intent helpful, but the scheme itself isn’t.

• It adds pressure to employers who are already struggling to pay bills.
• It’s great if employers are cash-rich, or if the economy was booming and those same employers were desperate to retain key members of their team. In the current situation of growing unemployment and increasing lockdown restrictions, it’s not.

Why do we feel that way?

An example is the best way to illustrate the key issue with the scheme:

• An employee works for one third of their normal hours.
• Under the Job Support Scheme, they’re paid 77.8% of their normal salary, so they’re (relatively) happy.
• The employer can only claim 22.2% under the scheme, but has to find 55.5% of the full time salary, despite only getting the benefit of 33.3% of the value from the employee.
• Additionally, the scheme starts in November and runs for six months. The portal to claim the government’s contribution doesn’t open until December, meaning that not only does the employer need to find a higher percentage of the salary, without tangible benefits, but they also need to find it in advance.
• The scheme was widely publicised, and if employers decide they cannot find the extra cash, it is likely to cause bad feeling with employees at an already difficult time for small businesses.

The Job Retention Bonus

One positive about the scheme is that it can be used in conjunction with the Job Retention Bonus, so the financial hit can be reduced slightly. This is a one-off payment that will be available in February 2021. Find out more about this scheme here.

Be careful!

Our advice, given the points made above, is to be very careful if you do decide to join the scheme.

There will be some businesses for whom the scheme may be beneficial, but make sure you are clear about the implications on your cashflow before you make that decision. Speak to your HR advisor to be 100% sure of the process you need to follow to amend employee’s hours, which will depend on your existing contracts, and consider any other options that may be available to you at the same time.

As with all of the Coronavirus support schemes, there will be an administrative burden to contend with, and you will need to keep very careful records of the amounts you claim and the justification for doing so.

 

Life is always complicated for business owners, but at the moment it’s horrendously so. Take the time to give this careful thought before making any decisions and, as ever, if we can help, please get in touch.