Vacation replacement: How does the Job Support Scheme work, who is eligible and how much do I get?

Rishi Sunak's new help for companies and jobs at the highest level

  • The vacation program is being replaced by a Job Support Scheme (JSS) to directly support the wages of employees who work at least a third of their regular working hours.
  • Companies pay workers the hours they work. For regular hours that they cannot work, the employer and the Treasury Department both pay one third of their wages, so they receive two thirds of the wages for missed hours.
  • JSS open to companies that have not used vacation.
  • The Self Employment Income Support Grant (SEISS) is being extended, with some of it being covered from November to January next year
  • It will be worth 20 percent of the average monthly earnings capped at £ 1,875.
  • Second grant for February to April 2021
  • The term of the bounceback loan guarantee has been extended from the current six to 10 years.
  • Interest periods of six months and payment holidays are now also available.
  • The VAT reduction from 20 to 5 percent for companies in the hospitality industry and tourism will be extended until March 2021.
  • Other companies that have deferred VAT invoices as part of the new payment system can repay them in 11 interest-free payments in the 2021/22 financial year instead of one full payment in March 2021.
  • The tax system for self-assessment "Time to Pay" was extended to January 2022.

Corporations have to pick up the lion's share of employees' wages even if they don't work according to plans Rishi Sunak outlined this afternoon.

The Chancellor presented the Job Support Scheme (JSS), with which the wages of employees in “viable” functions will be supported directly for six months from November onwards.

It will replace the Vacation or Job Retention Scheme (JRS), which is slated to end on October 31st.

The replacement with new lockdown measures imposed this week was a matter of great concern to politicians and business leaders.

However, some experts warned tonight that businesses could face a wave of layoffs this winter as businesses pay more than half the total wages of their employees, even if they only work a third of their regular hours.

Paul Johnson, Director of the IFS Think Tank, said: & # 39; The new Job Support Program represents a significant new government intervention to support jobs during the crisis.

"But it's significantly less generous than the vacation program it replaces – although, notably, the Chancellor gave no indication of the program's likely cost."

“He is trying to find a difficult path between supporting viable jobs and not retaining people in jobs that will no longer exist after the crisis breaks out.

"With employers now having to pay at least 55 percent of their employees' normal wages, it is clear that many jobs will be lost in the months ahead."

This depends on the utilization, but the program could potentially cost around £ 300 million per month for a million employees participating in the program.

For the taxpayer, however, this is considerably cheaper than the vacation system.

Speaking at a live press conference this afternoon, Sunak said, “We cannot continue to provide as much support as we did at the beginning of this crisis and maintain it at this level.

"It's not affordable and not sustainable over a long period of time."

How it works

Under the JSS plans, companies will continue to pay workers for their hours. However, the JSS is designed to help support workers' wages for the hours they lose due to working time restrictions or due to lack of business due to economic decline.

The Ministry of Finance and the employer each pay a third of their wages for regular working hours.

This means that workers receive their entire wage for the hours they work and two thirds of their wages for the hours they have not worked.

The Chancellor presented the Job Support Scheme (JSS), with which the wages of employees in “viable” functions will be supported directly for six months from November onwards

To be eligible, employees must have worked at least a third (33 percent) of their regular working hours. In this scenario, an employee would receive 77 percent of their total wages, with the company receiving 55 percent and the Treasury receiving 22 percent.

This is a big increase from the vacation program, where companies only paid 20 percent of wages while the government took care of the rest.

The government contribution is capped at £ 697.92 per month and is paid in arrears – your employer pays you and then reclaims it.

However, the Treasury Department is hoping that companies can reduce working hours instead of simply laying them off because they cannot afford to pay them.

Corporations will not be able to issue layoff notices to employees while participating in the Jobs Support Scheme, and the return of capital to shareholders will be restricted.

However, experts warned that if the system replaces November 1st vacation, the system is still putting a lot of pressure on businesses and may not be enough to prevent a huge wave of layoffs.

An example of how much workers can expect

John is a £ 10 builder who works a 40 hour week. He takes home £ 400 before tax.

According to Rishi Sunak's plan, he would work at least 13 hours a week. For those 13 hours he would be paid £ 308. His employer pays £ 220 and the Treasury Department pays £ 80.

The Treasury Department also gave an example of how it would work:

  • Beth usually works five days a week and makes £ 350 a week. Your company is suffering from declining sales due to coronavirus.
  • Instead of firing Beth, the company puts Beth into the Job Support Scheme and works two days a week (40 percent of her usual hours).
  • Her employer pays Beth £ 140 for the two days she works.
  • And for the time she's not working (three days or 60 percent, worth £ 210), she also makes two-thirds or £ 140, which brings her total earnings to £ 280, or 80 percent of her normal wage.
  • The government will give Beth's employer a £ 70 grant (one third of the hours not worked, which is 20 percent of her normal wage) to help them keep their jobs.
Source: Ministry of Finance

Source: Ministry of Finance

The system is designed so that the more people work, the less the Treasury has to pay. However, this carries the risk that companies will intentionally cut working hours in order to receive more grants.

Who is eligible

Any employer with a UK bank account and UK PAYE systems can apply for the grant.

Neither the employer nor the employee need to have previously used the Coronavirus Job Retention Scheme.

Large companies are required to pass a financial assessment test so that the system is only available to those whose sales are currently lower than before and who are struggling with Covid-19.

There will be no financial assessment test for small and medium-sized enterprises (SMEs).

A Treasury Department spokesman said: "To create viable jobs, the worker must work at least 33 percent of their usual hours in the first three months of the program.

"After three months the government will consider raising this minimum hourly threshold."

Rishi's "Pay as you grow" plan aims to improve business survival by making loan and tax payments easier

Companies are given more time to repay emergency loans and tax burdens according to the plans presented by the Chancellor today.

More than a million companies that have taken out bounce-back loans can repay them over a period of 10 instead of six years as part of a “pay as you grow” plan outlined by Rishi Sunak in the Commons.

He told MPs that this would cut monthly repayments for businesses almost in half, amid fears the economic damage could last longer than initially thought.

This brings the bounce-back loan program in line with the German express loan, which allows repayments over a decade, but charges higher interest rates.

Companies can also take interest repayments for up to six months, and after six repayments they can take a payment vacation for the same period.

In addition, the Chancellor has extended the availability of bounce-back loans, coronavirus business interruption loans, coronavirus large corporate interruption loans and the Future Fund until November 30th.

So far, they have disbursed more than a million loans totaling around £ 58 billion.

In addition, a new payment system gives more headroom for deferred VAT payments of over £ 30 billion, allowing businesses and VAT registered sole proprietorships to make 11 interest-free payments between 2021 and 2022 instead of a flat rate at the end of March.

The temporary 15 percent reduction in VAT for tourism and hospitality, which has been increased from 20 to 5 percent, will be extended until the end of March.

But not all companies believe it will work.

Jon Kay, director of Bury St. Edmunds-based Camp Tails Doggy Daycare, said, “Pay-as-you-grow, interest rate terms, extra payment vacation, it ends up getting lipstick on a pig. Debt is debt and for many small businesses struggling to recover in a brutal environment this will be the final nail in the coffin. The Chancellor must announce the protection of employers as well as employees. After all, the latter does not exist without the former. & # 39;

Mixed reaction

Union and business leaders have spoken out in favor of the new system – some of which have been restricted.

TUC General Secretary Frances O & # 39; Grady said: “The unions have made a strong commitment to further support the working population through jobs.

“We are happy that the Chancellor listened and did the right thing. This program will provide many businesses with a lifeline with a viable future beyond the pandemic.

“But there are not yet closed deals. Unprocessed hours under the system must not be wasted.

"Ministers need to work with businesses and unions to provide high quality retraining to prepare workers for the future economy."

Others praised the Chancellor's "brave steps", saying hundreds of thousands of jobs would be saved.

Dame Carolyn Fairbairn, Director General of the CBI, said it was right to provide targeted help with jobs with a future.

"These bold moves from the Treasury Department will save hundreds of thousands of viable jobs this winter," she said.

“Wage support, tax deferral and help for the self-employed will reduce the scarring effect of unnecessary job losses as the UK fights the virus. Further relief for business rates should remain on the table.

The Chancellor listened to evidence from companies and trade unions and acted decisively. It is this spirit of agility and collaboration that will help make 2021 a year of growth and renewal. & # 39;

But the economists were less enthusiastic.

Clare McNeil, associate director of the left-wing IPPR think tank, said: “It is the right decision to continue to support workers' and corporate incomes for the extremely uncertain next six months. However, getting the system right is imperative to avoid layoffs and the plan has three main flaws. & # 39;

She warned layoffs might not go far enough as companies would pay too much wages, as well as other costs like NI contributions and pensions.

The program is tempered by the Job Retention Bonus, which pays £ 1,000 for each employee remaining in employment. However, it ends in January and is closed to new applications

She also said the requirement to work at least a third of the hour would severely affect businesses that are completely unable to trade.

She added, "However, the program is more generous than expected as SMBs are eligible for assistance while large corporations need to demonstrate that their sales have been made except for coronavirus."

The program is reminiscent of the German short-time working allowance, which was recently extended until the end of 2021.

It enables employers to shorten workers' hours while keeping them in one job. The government pays the workers a percentage of the money they would have received for working on those lost hours.

For example, for someone who normally works 37 hours a week but is only now able to work 17, a company might pay full wages for the 17 hours, but the government might pay part of the remaining 20 hours.

According to the Munich Institute for Economic Research, at the height of the pandemic, half of all German companies had at least some of their employees in the program.

Influential British politicians, including former Prime Minister Gordon Brown, have urged the government to introduce such a system, or a similar system modeled on France, after the vacation program ends in October.

More help for the self-employed, but many miss it

Chancellor Rishi Sunak said the government would cover 20 percent of self-employed income after the current system, which covers 80 percent of income, expired.

Chancellor Rishi Sunak said the government would cover 20 percent of self-employed income after the current system, which covers 80 percent of income, expired.

More than a million people will have to fend for themselves after the chancellor fails to fill any gaps in his support for the self-employed, a trade organization warned.

Chancellor Rishi Sunak said the government would cover 20 percent of self-employed income after the current system, which covers 80 percent of income, expired.

He also promised to postpone self-assessment of income tax, a measure that will be "particularly important" for the self-employed.

However, aid is missing out on around 1.5 million people who have received far too little support from the crisis, said Andy Chamberlain, director of politics at the Association of Independent Professionals and Self-Employed (IPSE).

Only sole proprietorships who filed tax returns in the financial year ending April 2019 were entitled to the previous self-employed income support system (Seiss), and the Chancellor did not appear to close these loopholes on Thursday.

& # 39; The support for the self-employed announced today is absolutely inadequate.

"Although it is correct that Chancellor Seiss extended, the support announced today still excludes every third self-employed person," said Chamberlain.

& # 39; Limited Liability Professionals and new self-employed nearly entirely missed out on support during the last lockdown and faced dire months of financial devastation.

"Now they are facing a dark winter unless the government does more for them."

He added that the 20 percent cap on support may prove insufficient for many.

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