UK government to top up wages of staff working reduced hours

UK government launches new job support scheme

The UK government is to top up the pay of employees working reduced hours in order to support staff and businesses dealing with the financial impact of the Covid-19 (Coronavirus) pandemic.

The Job Support Scheme, which was announced by Rishi Sunak, Chancellor of the Exchequer, on 24 September 2020, will give organisations the option of keeping employees on the payroll on reduced hours as an alternative to making them redundant, as long as their roles continue to be viable. The scheme has been introduced to support the pay of employees working for organisations that have been directly affected by reduced demand due to the pandemic.

Under the terms of the scheme, which will run from November 2020 to April 2021, employees must work at least a third of their normal hours, which must be paid by their employer. For the hours that employees cannot work, the government and employer will each pay one-third of the lost pay. Anyone who is employed as of 23 September is eligible for the new scheme.

All small and medium-sized employers are eligible to apply, however, larger organisations will  only be eligible to do so if their turnover has fallen during the pandemic. The level of grant, which will be calculated based on an employee’s usual salary, will be capped at £697.92 per month.

Employers will be permitted to claim both the Jobs Support Scheme and the Jobs Retention Bonus.

Julian Cox, partner and head of employment at law firm BLM, said: “The new Job Support Scheme is no doubt going to cause a huge sigh of relief for thousands of businesses that were otherwise facing a cliff edge: either make job cuts today, or struggle to pay wages indefinitely. Particularly in sectors such as hospitality, which is grappling with new restrictions and curfews, support for jobs is needed just as much as at the outset of the pandemic, if not more.

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“The strategy is clear. Keep people in viable employment, and support businesses facing reduced demand for the coming six months. Employers in need of this support will now have to undertake a thorough understanding of where, if possible, to reduce hours, and whether they can balance necessary productivity with this reduction. Temporary contracts may also need to be agreed when hours are reduced, to ensure employees are clear on their new way of working.

“While the Chancellor noted that as our understanding of this virus evolves, the government’s approach must also evolve, some will be asking whether the new scheme goes far enough to plug the gap. Many struggling businesses will simply not be in a position to contribute that first one-third of wages, which we have seen already with the gradual wind-down of the furlough scheme. As employers began to make greater contributions, unfortunately, some had to look at job cuts as the cash simply wasn’t available to cover wages.”