Published Tuesday 29th September 2020
With the UK’s furlough scheme seemingly winding down towards the end of October, many businesses were left in a worrying situation. Under pressure from companies and others envisaging an employment crisis, a winter replacement has finally been announced.
When the Coronavirus Jobs Retention Scheme (CJRS) comes to an end, it will be replaced by the Jobs Support Scheme (JSS), which is set to run for six months from 1st November.
As cost reduction consultants, we’ve been working with UK businesses throughout this pandemic, helping them to save on their supply chain expenses. Here, we look at what the change in the system means for companies and whether it goes far enough, as the country braces for a challenging winter.
What is the UK Jobs Support Scheme?
JSS is designed to bridge the wage gap between furlough, which has been in place since March and a return to normal trading. As a result, the support from government has been reduced, while more is expected from employers.
To qualify for support from the JSS, employees must work for one-third of their regular hours. The employer will then pay one-third of the hours not worked, while the government will pay another third, capped at £697.92.
As a result, employees working one-third of their regular hours will receive at least 77% of their normal daily wage.
What Has Changed Following Furlough?
The amount of employee pay is designed to be similar to that received during the previous furlough, which was 80%. However, how businesses and the government get to that figure has shifted the last few months, and this is another step.
One of the most significant changes is company contributions. If an employee works one-third of their hours, the UK government will only pay around 22% of their daily wage. By contrast, the employer needs to pay about 55% – the one-third worked and an additional one-third of unworked hours.
The most significant point of contention with this scheme, however, concerns the working requirement. While all businesses could apply for the furlough scheme, the JSS will only be accessible if employees can complete one-third of their original working hours.
Is The Job Support Scheme Enough for UK Businesses?
The argument in favour of the JSS by chancellor Rishi Sunak is that the economy is probably as open as it will be, at least until the end of the year. Therefore, it now falls on businesses to provide work for people previously on furlough.
However, the reality is never as clean as it appears on balance sheets, much less so this year. With more pressure on companies, particularly those struggling to open, there are concerns the JSS doesn’t do enough to stop the long-forecasted unemployment storm.
The biggest concern right now lies with the hospitality and leisure sectors which have struggled to open in line with continuing (and recently increasing) restrictions. These jobs, viable long-term but not ready to reopen just yet, are increasingly likely to be cut due to a lack of support.
However, perhaps the most damning point of concern is the equation itself. Many analysts have pointed out that, due to companies having to top-up unworked hours, it makes more economic sense to keep one person working full-time than to keep two people employed part-time under the JSS.
At this time of rapidly-changing requirements and regulations, many businesses will be hoping for more support before winter coronavirus restrictions increase, as is becoming increasingly expected. The UK Government has said it will review the new scheme after three months, but this could be too late for some sectors.
If you would like support with reducing your expenses ahead of the winter period and beyond, why not speak to our team today? We’ve worked with major UK businesses across various industries during this period and will work with your company to streamline your long-term procurement strategies.