Job Support Scheme: what is the furlough scheme replacement?

As COVID-19 continues to cause disruption and difficulties across the economy, what measures have the government introduced to help businesses navigate their way through this period?

Rhiannon Philps Last updated on 20 January 2021.
Job Support Scheme: what is the furlough scheme replacement?

On 24th September 2020, Chancellor Rishi Sunak announced a “Winter Economy Plan” to support businesses over the coming months.

Rishi Sunak introduced a number of measures to help businesses and prevent unemployment in his Summer Statement, and has now released more information on how that support will continue through the end of 2020 and into 2021.

Many industries are still experiencing financial difficulty and hardship as a result of the COVID-19 pandemic, particularly the leisure, entertainment, and hospitality sectors, while businesses in areas under local lockdowns are similarly struggling to recover.

Read more on how businesses have been affected by COVID-19.

A significant number of employees remain on furlough, especially in the industries that are still under restrictions. With the threat of large-scale unemployment on the horizon and with little hope of a quick recovery as COVID-19 cases continue to rise, the government has been forced to implement further measures to support businesses and protect jobs through this time.

With the Coronavirus Job Retention Scheme in its final stages as it ends on 31st October 2020, there was considerable pressure on the Chancellor to extend it or replace it with a similar scheme.

The Job Support Scheme is the successor to the Job Retention Scheme. It is intended to give targeted support to those businesses that have been and continue to be the most adversely affected by COVID-19, aiming to bolster “viable” jobs and prevent mass redundancies.

Read on to find out more about the Job Support Scheme and the other coronavirus business support measures.

What is the Job Support Scheme?

The Job Support Scheme replaces the original furlough scheme which ends on 31st October 2020. Under the new Job Support Scheme, the government will again contribute towards an employee’s wages, covering up to one-third of their wages for any hours they do not work.

To be eligible for the scheme, employees have to be working at least one-third of their usual hours. This is to ensure that the scheme is protecting “viable” jobs that have a future but will take longer to recover, rather than unsustainable jobs that are surviving solely through government funding.

The maximum that the government will provide for each employee is £697.92 per month, but this amount will depend on the employee’s usual salary and the number of hours they work. Overall, the government will cover no more than 22% of an employee’s salary.

When will the Job Support Scheme launch?

The Job Support Scheme will start from 1st November and continue for six months until April 2021.

How will the Job Support Scheme work?

Employees will need to work at least one-third of their normal hours, for which they will receive 100% of their pay from their employer. The cost of the remaining hours that they do not work will be split between the government and the employer, with each covering one-third of these wages.

So, employees will receive 100% of their pay for the hours they do work and two-thirds of their usual pay for the hours they do not work. This means they will receive at least 77% of their overall salary.

After three months the government may review and increase the minimum hours threshold.

If a business brings back a furloughed employee using this Job Support Scheme, they will still be eligible to claim a £1,000 Job Retention Bonus if the employee is kept on until at least 31st January 2021 and they meet the other eligibility criteria.

Who is eligible for the Job Support Scheme?

All UK SMEs are eligible for the Job Support Scheme. However, large businesses will need to prove that their turnover has dropped significantly as a result of COVID-19 via a financial assessment test if they wish to claim this support.

Businesses do not need to have used the Job Retention Scheme to benefit from the Job Support Scheme.

Employees will need to be on an employer’s PAYE payroll on or before 23rd September 2020 in order to qualify.

While a business is claiming a Job Support grant for an employee, that employee cannot be made redundant during that period.

How do I apply for the Job Support Scheme?

Employers will be able to claim a grant through the Job Support Scheme online on from December 2020. These grants will be paid in arrears and on a monthly basis.

What other support is available for businesses?

Self-employment support

The Self-Employment Income Support Scheme (SEISS) has been extended until 30th April 2021.

Self-employed traders that are struggling during the qualifying period (1st November onwards) as a result of COVID-19 can apply for an initial government grant to cover 20% of their average monthly trading profits for a three-month period, from November to the end of January 2021. The maximum amount you can claim is £1,875 and this grant is taxable. It will be paid in a single instalment.

The Chancellor also announced a second grant that will be available to self-employed individuals to cover the period between February 2021 and the end of April. This second grant may differ from the first grant, depending on the situation at that time.

To receive these grants, you must have been eligible for the existing Self-Employment Income Support Scheme, although you do not need to have previously made a claim.

Loan schemes

Any business that has taken out a government-guaranteed Bounce Back Loan can make flexible repayments through a new Pay as You Grow repayment system.

This will allow businesses to extend their loan terms from six to ten years, and businesses that are struggling to make repayments can suspend payments or make interest-only repayments for a period of six months, without affecting their credit rating.

Businesses will be able to pause repayments only once, after already making six repayments, but they will be able to use the interest-only payment option on up to three separate occasions.

Lenders can also extend the terms of any Coronavirus Business Interruption Loans from six to ten years to help businesses with their repayments.

The deadline for applying to all government-backed coronavirus loan schemes has been extended until 30th November 2020. This applies to the Coronavirus Business Interruption Loan Scheme, the Coronavirus Large Business Interruption Loan Scheme, the Bounce Back Loan Scheme, and the Future Fund.

A new loan scheme is set to be introduced in January 2021.

VAT cut

Businesses in the tourism and hospitality sectors have benefited from a 15% VAT cut which was expected to last until January 2021, but has now been extended. The Chancellor announced that VAT for businesses in these industries will remain at 5% until 31st March 2021.

Flexible tax payments

Any businesses that have deferred their VAT payments because of the coronavirus crisis will be able to benefit from the New Payment Scheme. This will allow them to pay back their deferred VAT payments in eleven smaller instalments over the 2021-22 financial period, without accruing any interest, instead of paying it as one lump sum in March 2021.

HMRC have also extended their tax deadline for individuals that complete a self-assessment tax form. Now, the deadline for repaying their outstanding tax bill in full is January 2022.

About the author:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

If you have any feedback on this article please contact us at [email protected]