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COVID-19 EU PolicyWatch

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Eurofound's COVID-19 EU PolicyWatch collates information on the responses of government and social partners to the crisis, as well as gathering examples of company practices aimed at mitigating the social and economic impacts.

Factsheet for case GB-2020-45/1234 Updated – measures in United Kingdom

The new Jobs Support Scheme

The new Jobs Support Scheme

Country United Kingdom , applies nationwide
Time period Temporary, 01 November 2020 – 01 May 2021
Type Other initiatives or policies
Category Employment protection and retention
– Income support for people in employment (e.g. short-time work)
Author Claire Evans (Warwick University) and Eurofound
Case created 03 October 2020 (updated 24 February 2021)

Background information

With the Coronavirus Jobs Retention Scheme (CJRS) due to finish at the end of October and restrictions being re-imposed on parts of the country, concerns were mounting about the combined impact these would have on employment levels. Even before the latest economic and social restrictions, official forecasts were projecting a possibility of joblessness shooting up to four million by early next year.  As such, pressure was mounting for the government to act. Thus, in a speech to the House of Commons on 24 September, the Chancellor outlined his Winter Economy Plan; central to this was the new Jobs Support Scheme, which is essentially a short-hours working subsidy, similar to the German Kurzarbeit scheme.

Content of measure

The new scheme will run for six months from the 1 November. Essentially, the government will contribute towards the wages of employees who are working fewer than normal hours. In order to qualify (at least for the first three month of the scheme, the employee must work at least 33% of their usual hours - the government will review whether to increase the threshold after three months of the scheme's operation).  Employees will be able to “cycle on and off” the scheme and do not have to work the same pattern each month. However, each short-time working arrangement must cover a minimum period of seven days.

For the hours actually worked, employers will continue to pay the employee's usual wages. However, for every hour not worked, the government and the employer will each pay one third of the equivalent salary. The government’s contribution will be capped at GBP 697.92 a month; much lower than the cap on the original furlough scheme of GBP 2,500. Because of the requirement to work at least a third of usual hours, the scheme will cover the wages for a maximum of 66.6% of hours not worked. This means that the government contribution is worth 22% of full pay, whilst the employer contribution will be 55%.  As a result – taking together pay for full hours worked, and state and company subsidised wages for down time – employees using the scheme will receive at least 77% of their usual pay (unless it is cut down by the government cap of GBP 697.92).

Regarding eligibility, employees under the scheme must not be on a redundancy notice, in a step designed to encourage companies to retain staff. Indeed, the scheme is designed to complement the government’s jobs retention bonus, announced by the Chancellor in his summer economic update. Under this scheme, businesses receive a one-off payment of GBP 1,000 for every previously furloughed employee they still employ at the end of January 2021. The new scheme will be open to all employers with a UK bank account and part of PAYE. All small and medium-sized enterprises (SMEs) will be eligible. However, large businesses must show their business has been adversely affected by COVID-19, with such companies needing to demonstrate that turnover has fallen by a third. The government also stated that it expected that large employers would not pay dividends to shareholders while using the scheme.

The scheme is in part designed to save Government money. The Chancellor outlined in his speech that a worker on the furlough scheme gets GBP 1,400 a month on average. In comparison however, if that same person was on the job support scheme, the maximum amount of government support they would get would be GBP 300 per month. If a million workers are covered by the new scheme, the Chancellor stated, it would cost the exchequer GBP 300 million per month, whereas the furlough scheme has cost almost GBP 40 billion since its launch in March.

However, concerns have been voiced as to the scheme's exclusion of workers at companies forced to close because of coronavirus restrictions, where no working hours may be possible. Moreover, the opposition Labour Party has said that the new scheme incentivises employers in financial trouble to dismiss staff by making it more expensive to keep two people on reduced hours than to dismiss one and keep the other.

Updates

The following updates to this measure have been made after it came into effect.

17 December 2020

A second UK lockdown was announced by the Prime Minister on 31 October 2020, which came into effect on 5 November 2020. As a result of the re-introduction of tighter restrictions, the furlough scheme see case , which was due to expire on 31 October and be replaced by the Job Support Scheme, was extended until December initially, with the Jobs Support Scheme suspended until then. However, on the 17 December, the Chancellor announced that the furlough scheme would be extended until the 30 April 2021.

Use of measure

As the scheme is yet to be implemented, the numbers of companies which will take up the subsidy, as well as the numbers of employees who will be covered, is unknown.

Independent economists put the cost of the chancellor’s Winter Plan in total at around GBP 5 billion, on top of the GBP 160 million already spent by the government. The Chancellor declined to put an exact price tag on the package, beyond saying that VAT measures will cost around GBP 800 million and job support about GBP 300 million a month for every 1 million workers enrolled.

Target groups

Workers Businesses Citizens
Employees in standard employment
Applies to all businesses Does not apply to citizens

Actors and funding

Actors Funding
National government
Companies
National funds

Social partners

Social partners' role in designing the measure and form of involvement:

Trade unions Employers' organisations
Role Consulted Consulted
Form Direct consultation outside a formal body Direct consultation outside a formal body

Social partners' role in the implementation, monitoring and assessment phase:

  • No involvement
  • Main level of involvement: Peak or cross-sectoral level

Involvement

The Chancellor has informally consulted with both the CBI and TUC on employment measures introduced in response to the pandemic. This consultation has been acknowledged by him and the bodies themselves. However, this is not done through formal institutionalised social dialogue fora/mechanisms, because these do not exist in the UK. It is assumed that both bodies have made recommendations as to the design of the new scheme and will have lobbied for it initially; however, the nature of their input and the extent to which it has effected the scheme's design, is not known.

Views and reactions

It has been widely reported that the new short-time working scheme has the broad support of the trade unions and the business lobby groups, and moreover, the scheme seems to have been designed with their input, as was the original furlough scheme (The Independent, 2020).  Indeed, the CBI's Director, Carolyn Fairbairn, had called for a successor to its furlough scheme to protect jobs, amid warnings that a large number of redundancies were expected as companies prepare for wage support to end in October (The Financial Times, 2020). On the scheme's launch, the CBI stated that it would, in conjunction with the other measures outlined, “save hundreds of thousands of viable jobs this winter.". The Chambers of Commerce director general, Adam Marshall, said that the package would give the economy “an important shot in the arm”, but warned that the chancellor “must remain open to taking additional action to support parts of the economy facing unprecedented challenges over the months ahead”. Manufacturers’ organisation Make UK said that the measures would “help avoid the significant redundancies we were facing had there been a cliff-edge end to government support”.

The TUC confirmed that trade unions have been pushing hard for several months for jobs support to continue beyond October. It described the scheme as an 'important step' and said that it will provide a lifeline for many firms with a viable future beyond the pandemic. However, it has also argued that much more support is essential if large-scale job losses are to be avoided. The TUC calls on the government to urgently work with unions and business - in a National Recovery Council - on a wider support package for the hardest-hit sectors of the economy. It states that the industries such as aviation, retail, arts and hospitality needed targeted support now.

Sources

  • 24 September 2020: Woodcock, A. (2020) Job Support Scheme: Rishi Sunak announces plan to top up wages of workers on reduced hours.' The Independent, 24 Septemeber. (www.independent.co.uk)
  • 28 September 2020: TUC (2020) The new job scheme is important – but ministers will need to do far more (www.tuc.org.uk)
  • 24 October 2020: UK Government (2020) Chancellor outlines Winter Economy Plan (www.gov.uk)
  • 17 December 2020: Chancellor extends furlough and loan schemes (www.gov.uk)

Citation

Eurofound (2020), The new Jobs Support Scheme, case GB-2020-45/1234 (measures in United Kingdom), COVID-19 EU PolicyWatch, Dublin, http://eurofound.link/covid19eupolicywatch

Disclaimer: This information has not been subject to the full Eurofound evaluation, editorial and publication process. All information is preliminary and subject to change.