Chancellor Rishi Sunak announced a replacement for the coronavirus job retention program based on a German-style wage subsidy system.
Faced with the prospect of increased job losses this fall when the holidays were closed at the end of October, and the tightening of economic restrictions as the pandemic worsened, the “employment support scheme” is the l backbone of its winter economy plan.
How does the new system work?
The government will contribute to the wages of employees who work less than normal hours. However, there are fears that workers at companies forced to shut down due to coronavirus restrictions – where no work schedule is possible – may find themselves without support.
Employers will continue to pay their staff their regular wages for hours worked. For hours not worked, the government and the employer will each pay one-third of the equivalent wage.
Who is eligible?
The employee must not be the subject of a dismissal notice, in a process aimed at encouraging companies to retain their staff.
During the first three months of the scheme, the employee must work at least 33% of his usual hours. The government will consider whether to increase the threshold after three months.
Employees will be able to “turn on and off” the program and will not have to follow the same pattern every month. However, each part-time work arrangement must cover a minimum period of seven days.
The program will be open to all employers with a UK bank account who are part of PAYE. All small and medium-sized enterprises (SMEs) will be eligible. However, large companies must show that their business has been affected by Covid-19. Large companies will have to show that their turnover has fallen by a third.
The government has said it also expects large employers not to pay shareholders dividends when using the system.
How much will the workers receive?
For every hour not worked, the employer and the government will each pay one-third of the employee’s regular salary. The government’s contribution will be capped at £ 697.92 per month – well below the original leave program cap of £ 2,500.
Due to the obligation to work at least one third of the usual hours, the scheme will cover the salary for a maximum of 66.6% of the hours not worked. This means that the government contribution is worth 22% of the full salary.
As a result – taking together the wage for full hours worked and the state and company subsidized wages for downtime – employees using the plan will receive at least 77% of their regular wages (unless ‘it is reduced by the government cap of £ 697.92). .
If an employee works only 33% of his usual hours, the government subsidy would therefore amount to 22% and the salary contribution would be 55%.
How long will the program run?
It will last six months from November 1 to replace the leave program, which ends on October 31.
Short-time work subsidies are designed to accompany the government’s job retention bonus, announced by Sunak in its summer economic update. As part of the job retention bonus, companies receive a one-time payment of £ 1,000 for each employee previously on leave if they are still employed at the end of January next year.