The Coronavirus “Job Support Scheme” may be better than you think, but you need to model it

On Thursday 24th September the Chancellor announced details of the Winter Economy Plan and within it the key measure was the Job Support Scheme (“JSS”).

What does the JSS introduce and when?

The JSS comes into effect from 1 November 2020 and is the successor to the Coronavirus Job Retention Scheme (“CJRS”). CJRS has been criticised for keeping jobs going which are now not “viable” in the current economic climate and so has been criticised for using taxpayers’ money in an inefficient way to defer inevitable redundancies.

The JSS provides a lower headline level of support and it is only intended to support roles which a business views as “viable”. The Chancellor has made it clear that whether a role is viable is for the business to decide.

In practice, because the scheme requires a business to at least fund 33% of the cost of the employees’ wages, then whether or not a role is viable will be dictated by whether or not the business is willing and able to support that cost (and the Chancellor will have been aware of that in saying it is not for him to determine if a role is viable). Commercial realities will decide viability.

The JSS requires an employer to pay for the employees’ worked hours, which must be a minimum of 33% of their normal working hours, plus also to pay 66% of their non worked hours, but the employer can claim back 33% of the employee’s usual wage for the non-worked hours from the Government.

But doesn’t JSS just make part-time workers more expensive?

The initial view of the Job Support Scheme was that it isn’t as attractive as the Coronavirus Job Retention Scheme. Some employers have dismissed the JSS because on first reading it puts an employer in the position of having to pay more to retain part-time workers than the pro-rata number of full-time workers.

As a simple example, for an employee working 33% of their normal hours (and earning less than £37,500 per annum), after a claim for JSS has been processed, the cost of the salary would have been borne as follows:

EmployerGovernmentForegone
Salary33% + 22% = 55%22%23%

The immediate criticism has been that the employer must cashflow 77% of the salary, claim back 22% and ultimately must fund 55% after a JSS claim. The initial view has therefore typically been “why would I retain three part-time workers on 33% of normal hours if under the JSS this costs significantly more than one full-time worker doing 100% of normal hours”. Businesses have queried the logic of what appears to be a 155% cost of three 33% utilised part-time staff compared to one full-time 100% utilised staff member.

Is the JSS only for staff you can’t afford to lose?

Is the JSS aimed at “viable” jobs you can’t afford to lose but can’t afford to fully utilise? Is the JSS aimed only at staff where you are willing to effectively keep them on knowing you are incurring additional staff costs in respect of them? Is it only for skilled, or trained, staff where you could not easily replace them, and you would have lost the sunk cost of training?

We believe it is more nuanced than that and for many businesses the Government will be willing to fund up to 100% of “non utilised” time for staff earning up to approximately £16,500 a year until 31 January 2021.

We don’t think that date is an accident, we think this has probably been done to ensure continuity of employment through the Christmas period by employers who plan how to use the JSS and CJRS together in the optimal fashion.

We think that once businesses realise that the Government can fund the downtime staff earning up to £16,500 a year where Coronavirus has reduced them to working part-time, that will make the scheme much more attractive than initially thought.

What has the JSS got to do with the CJRS? Isn’t CJRS finished on 31 October 2020?

The CJRS finishes in terms of accrual of funding for staff on a monthly basis on 31 October 2020. However, the part of CJRS that shouldn’t be overlooked is the “CJRS bonus” of £1,000 per staff member which becomes payable on 31 January 2021 (provided certain conditions are met). The key conditions are:

  • The employee has been successfully included within a CJRS (furlough) claim by the employer previously
  • The employee should have been continuously employed to 31 January 2021
  • The employee must have earned at least £520 a month on average between 1 November 2020 and 31 January 2021

And here is why it matters – the Chancellor made it clear that employees who qualify for the CJRS bonus can also be funded via JSS. If you view the funding that you will obtain from JSS and CJRS combined up to 31 January 2021, then the cost of keeping a number of part-time employees can become much more equivalent to the cost of a full-time employee.

As an example – where all employees in this example earn £16,500 per annum, are funded by JSS and qualify for the CJRS bonus then the total employer cost of hiring different combinations of those employees (including NIC and pension costs) until 31 January 2021 would be:

As you will see from the example above, the cost of several part-time employees can even be lower than the cost of a single full-time employee in the right circumstances.

The answer is fact specific – do line by line modelling

To work out whether you can have part-time employees on “JSS + CJRS” and have those part-time employees costing no more than, or maybe even less than, full-time employees, you need to model it per employee based on:

  • The salary
  • The hours you want them to work
  • Whether they have validly been included within CJRS and you can ensure they qualify for a “CJRS bonus” 

Contact us

For further advice, please contact one of our specialists:

Alastair Wilsonalastair.wilson@taitwalker.co.uk
Clair Williamsclair.williams@taitwalker.co.uk
Rachael Matthewsonrachael.matthewson@taitwalker.co.uk