What small-business owners need to know about the Job Support Scheme

With the government’s Job Retention Scheme expiring at the end of October, small-business owners need to make sure they know how to get the best out of the Job Support Scheme that replaces it.

The good news for small business owners is that the new scheme Job Support Scheme, which comes into force from 1 November, has been made more generous. 

The biggest shift is that, while the Job Retention Scheme enabled employers to pay staff for whom they did not have work – furloughed employees – its replacement will, in ordinary circumstances, only support employees working at least some of the time. But importantly, when the Job Support Scheme was announced in September, the government said employees would have to work at least 33% of their usual hours; now this will come down to just 20%, the equivalent of one day a week for a full-time employee. Employers will pay staff as normal for the time they ask them to work, with staff then eligible for two-thirds of their normal wages for hours they are told to stay away. 

Previously, the government had said the cost of this top-up would be shared equally between the Job Support Scheme and the employer – with each paying 33% of staff wages for these unworked hours. But under the changes announced last week, the employer’s contribution has been reduced to 5%, with the state picking up the rest of the tab.

Reducing employers’ costs

The Resolution Foundation think tank says the changes to the scheme will be a big help to many employers. It calculates that for a firm intending to keep a worker previously furloughed, the average cost of employing them for half their normal hours has fallen by 85%. Under the first incarnation of the scheme, the employer’s costs would have been £233 per month. The figure is now £35.

Hopefully, this will enable more small businesses to keep staff on, even if their trade has yet to return to the levels seen before the pandemic. The scheme does require employers to fund at least some salary costs – unlike in the first few months of furloughing – and to have at least some work for staff to do. This means it won’t protect as many jobs as the Job Retention Scheme.

Ministers also point out that further help for companies retaining furloughed workers is on the way. All employers will be able to claim a £1,000 bonus for every furloughed staff member still on their books at the end of January. This will go some way towards addressing one criticism of the Job Support Scheme, where in certain circumstances it could be cheaper for employers to keep fewer members of staff working longer hours.

Finally, it’s important to note that the new Job Support Scheme thresholds for hours worked and employers’ contributions are only minimums, with firms free to ask staff to work more than 20% of their hours and to top up their wages. 

This will be crucial for staff. An employee working 20% of their usual hours and getting no additional top-up above the employer’s minimum contribution to their wages will be 27% short of the income they should be earning in ordinary times. Under the original Job Support Scheme proposal, this figure would have been no higher than 22%, and it was just 20% under furloughing.

Recommended

Alternative finance – tap into new sources of credit for your business
Small business

Alternative finance – tap into new sources of credit for your business

Britain’s booming alternative-finance sector is a boon for small businesses, says David Prosser.
27 Jul 2021
Don’t cut corners when insuring your business
Small business

Don’t cut corners when insuring your business

Scrimping on insurance policies for your business is a false economy, says David Prosser.
13 Jul 2021
Government support schemes for Covid-hit businesses are coming to an end
Small business

Government support schemes for Covid-hit businesses are coming to an end

Government support schemes to bolster business through the pandemic are ending, despite the extended lockdown
25 Jun 2021
Are your company’s assets at risk from your creditors?
Small business

Are your company’s assets at risk from your creditors?

Loans with personal guarantees attached may now damage small companies, says David Prosser.
23 Jun 2021

Most Popular

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism
Economy

The MoneyWeek Podcast: Asia, financial repression and the nature of capitalism

Russell Napier talks to Merryn about financial repression – or "stealing money from old people slowly" – plus how Asian capitalism is taking over in t…
16 Jul 2021
Why the UK's 2.5% inflation is a big deal
Inflation

Why the UK's 2.5% inflation is a big deal

After years of inflation being a financial-assets problem, it is now an “ordinary things” problem too, says Merryn Somerset Webb. But central banks st…
16 Jul 2021
Three companies that are reaping the rewards of investment
Share tips

Three companies that are reaping the rewards of investment

Professional investor Edward Wielechowski of the Odyssean Investment Trust highlights three stocks that have have invested well – and are able to deal…
19 Jul 2021