What Will Happen When the Furlough Scheme Ends?
Written by PayPlan on 28 October 2020
With the furlough scheme finishing at the end of October, the Government has put a new system in place to try and protect jobs – the Job Support Scheme (JSS).
What is the furlough scheme?
If you are on furlough, you are instructed not to work and will be paid a percentage of your salary (partly supplemented by the Government) for doing so. As of October 2020, the Government pays 60% of wages up to £1,875 for the hours that an employee is off work. Employers will pay pension and National Insurance contributions, as well as topping up wages to ensure they receive 80% of their wages, up to £2,500.
So, in short, the Government will pay your employer 60% of your income, but your employer must top you up to at least 80% of your income. Here’s an example:
- You earn £1,000 per month.
- On the furlough scheme, you will be paid £800 per month to not work.
- £600 of that will be paid by the Government and £200 by your employer.
We’d recommend you keep in contact with your employer to discuss their plans for the end of the furlough scheme, or if you feel if you have been underpaid for the duration of the scheme.
What is replacing the furlough scheme?
The furlough scheme will be coming to an end on 31st October and will be replaced by the Job Support Scheme (JSS).
The aim of JSS is to stop a wave of redundancies due to lower demand in small and medium enterprises. It will run for 6 months starting from November 1st and is being introduced to top-up salaries where firms are unable to bring back their employees full time.
To be eligible, you must have been on your employer’s payroll since September 23rd 2020. You must also be in a ‘viable job’ that provides ‘genuine security’, where you can work at least 1/3 or your normal hours. The Government and your employer will then each pay for 1/3 of the remaining wages for hours unworked. In theory, this means that all employees should get at least 77% of their normal working wage which is very similar to the current 80% furlough pay. The main difference is that the employer is now paying most of your wage, rather than the Government.
What you may not be aware of…
- You can be moved on and off the scheme or be asked to work different hours.
- Each working arrangement must cover a period of 7 days
- You cannot be made redundant or put on notice while JSS is being claimed on your behalf. If you are, your employer is legally required to stop claiming for you.
You should receive your payslips as usual but if you do have any questions about your earnings, contact your employer for advice.
How is JSS calculated?
- Let’s say you have worked 40 hours per week, 5 days per week, but have been on the furlough scheme since March.
- You’ve been told that from November you will be returning to work but can only return on 13.33 hours per week (40/3 = 13.33) – a third of your hours.
- This means from November, you will have 26.67 unworked hours.
- Of those unworked hours, your employer will cover a third and the Government will cover a third
- This means that there will be one third of your unworked hours that you’re not paid for.
In summary – as was the case with the furlough scheme – you earn less overall but do not have to work all of your contracted hours. You may be able to use any spare time to learn new skills or take up a hobby. If your employer will allow, you can also explore taking on a part-time job to top up your earnings.
What is a “viable job?” and how is this different from furlough?
The Government is offering protection for “viable jobs which provide genuine security.” These are jobs where there is a genuine need because the businesses are partially or fully trading again. This means that for many people working in sectors that aren’t trading – like some hospitality venues – they won’t be eligible for the scheme.
The main difference between furlough and JSS is that:
- Furlough applies to all jobs regardless of whether the business you work for is able to re-commence trading or not
- JSS only applies to companies that are partially or fully trading again
You should find out from your employer if your job is classed as ‘viable’. If it is, the JSS solution could apply to you. If your job isn’t deemed viable and your company is struggling, you may be at risk of redundancy.
If you are made redundant, there is help and support available. Use our Redundancy Guide to find out what your options are. This contains lots of useful information about your rights, as well as top tips for finding future employment.
What support can the self-employed get?
If you are self-employed, you may still be eligible for government support. Visit GOV.UK to find out what help you could get.
What will happen from November?
There will be an extension to the Self-Employment Income Support Scheme (SEISS). It will provide 2 further grants that will last for 6 months from November 2020 to April 2021. The grants will be paid in two instalments, each covering a 3-month period. The first instalment will cover November to January, and it will cover 20% of average monthly trading profits. The 2nd grant will be paid from February but HMRC are yet to review at what rate this will be.
If you are a sole trader or partner in a company, you will continue to get the same help in the way of the Self-Employment Income Support Scheme (SEISS). That main thing that is changing is the monetary value of help you will get – this is likely to decrease by 10%. You can find your trading profits on the documents you submitted to HMRC on your tax return.
Filed under Industry News