As of 31 October, the Coronavirus Job Retention Scheme (the JRS) will cease to exist. We now know about the details of its successor, the Job Support Scheme, or JSS. The JSS isn’t as generous as the JRS – it’s clear that the government are now at the point where they recognise that many jobs simply aren’t coming back any time soon, and can’t be subsidised forever.
Here’s an example.
Let’s say you’ve an employee on £24,000 a year, so £2,000 a month – adding in £175 of National Insurance and £44 of pension contributions, they’ll cost you £2,219 a month.
At the moment, you don’t have enough work for them to do, but as long as you bring them in at least 33% of the time and pay them for that time, the JSS will contribute towards the rest of their wages. It’ll pay a third of the remainder (up to a maximum of £697.92), with you paying another third, the rest going unpaid. The employee doesn’t quite get a full wage, but it’s a decent deal for them.
If you’ve enough work for our example employee to come in 50% of the time, you’ll have to pay £1,000 a month for that. That leaves a balance of another £1,000. The JSS will pay a third of that - £333 – and you have to pay another £333. That gives the employee a total wage of £1,666 for the month – 83% of their usual salary for working 50% of the time, not too bad!
It’s not such a good deal for the employer though.
As well as paying £1,333 of salary (£1,000 for the time they’re working and another £333 for the time they’re not), you have to pay National Insurance of £129 and pension contributions of £35. So your total outlay is £1,497. If the employee works a 40 hour week, then when they were working full-time the total cost to you worked out as just less than £13 an hour. Now the cost per hour is more than £17 – it’s more than 33% higher than it used to be.
Presumably you considered what you used to pay to be a fair economic bargain for the value generated by the employee, and it’s unlikely that they’ve now become 33% more productive. So, is a rational employer likely to think that the JSS offers a good deal? Probably not, especially if you’re juggling a bunch of employees – two people working 50% of their normal hours clearly cost miles more than a single employee working full-time, so there’s a big financial incentive to get rid of part timers and try and give the work to a smaller number of full-time staff (whereas normally NI and pension thresholds mean there’s a small financial incentive to favour part-timers).
So, just based on the numbers, it doesn’t on the face of it make much financial sense for employers, which is just the inevitable corollary of it being a great arrangement for employees with a fairly small government contribution (contrast the maximum government contribution of £697.92 with the maximum of £2,500 they'd contribute under the JRS).
But, there could still be some situations where the numbers stack up.
There could be “switching costs” that you need to think about. If that employee’s been with you for a while, they’ll have built up some entitlement to redundancy pay. That could be, say, £5,000. And if you think you’ll need to recruit a replacement for them in the Spring if things pick up again, and you’ll do that by paying a recruiter, that could be another £5,000. So you might think that overpaying someone for a while is better than shelling out £10,000 to ditch them and replace them in the Spring – although that does of course rely upon the degree of confidence you have about 2021.
And there will also be situations where it’s not all about the numbers, of course. Many employers will want to support employees through a difficult time, and may well be content with what’s a bad deal based on the numbers. It’s not always about spreadsheets!
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