UK Chancellor Rishi Sunak recently unveiled how the government plans to continue supporting workers who have not been able to return to work yet or to resume normal hours as a result of the Covid-19 pandemic, but how is the newly announced Job Support Scheme likely to impact the job market over the coming months? In this article, JVP Group’s Cath Harrison shares her reaction to the changes coming into force at the end of October, and what impact this is likely to have on employers.
Cath Harrison, Managing Director of JVP Group
Whilst further support to help retain jobs is very welcome, the Job Support Scheme is “neither intended to be or sufficient enough to save every job,” says JVP Group’s Managing Director Cath Harrison, in response to new plans laid out by the Chancellor as the Furlough Scheme winds to a close, inevitably prompting difficult conversations to be had between firms and their employees.
“The majority of companies are experiencing significant reduction in revenues,” says Harrison. “And, whilst the new scheme will be a lifeline to help retain highly skilled employees for some businesses, paying towards the non-worked hours of employees is going to be a challenge too far for some.”
There’s no denying the scheme will be welcomed by employers across the UK and will go some way in reducing the number of people facing unemployment this autumn, but when broken down it means employers will be expected to pay 55% of an employee’s normal pay for 33% of the work.
Ultimately, it would cost less for an employer to take back one employee full time, rather than two employees on a part time basis through the Job Support Scheme.
The below chart gives a helpful breakdown of the costs involved for an employer based on the percentage of hours worked by an employee:
What is the Job Support Scheme and how will it work?
In a nutshell, the Job Support Scheme will see workers get three quarters of their normal salaries for six months, with the aim to stop mass job cuts. Here’s what we know so far about the new plans:
- The government will subsidise the pay of employees who are working fewer than normal hours due to lower demand
- It will apply to those who can work at least a third of their usual hours, and employers will be expected to pay employees for the hours they do work
- For the hours employees cannot work, the government and the employer will each cover one third of the lost pay, with a grant to be capped at £697.92 per month
- All small and medium sized businesses will be eligible for the scheme, and larger business will be eligible if their turnover has fallen during the crisis
- It will be open to employers across the UK even if they have not previously used the Furlough Scheme
- The scheme will run for six months starting in November 2020
Significantly, and in contrast to the Furlough Scheme, employees’ roles cannot be made redundant or employees cannot be put on notice of redundancy during the period for which the employer is claiming a grant for that employee. What is not clear is whether that refers to the whole six months of the Job Support Scheme or a particular pay period, or what will happen to previous payments if someone’s role is made redundant.
How will the Job Support Scheme impact employers and how will it affect different industries?
“We expect to see the Job Support Scheme have a positive impact on the aerospace and engineering sectors where businesses will be keen to retain skills and expertise of the labour market,” Harrison explains.
“It could potentially cost these businesses far more in the long-term when it comes to having to recruit for these skilled positions within their organisation if they do make their existing workforce redundant, as they will need to find individuals with a niche skillset and experience of working within the sector, so the talent pool will inevitably be limited. These businesses will be keen to retain the experience and knowledge they already have, and the Job Support Scheme will certainly help them to do that.
“The initiative will also help some businesses in the hospitality, leisure and retail sectors but certainly not all of them, as to drive costs down, some employers may choose to retain sufficient employees on full time hours rather than having more employees working only part time hours and non-worked hours part assisted by the Jobs Support Scheme.”
How will the Job Support Scheme affect unemployment levels in the UK?
“Further support to help retain jobs is very welcome, however it’s clear that the new Job Support Scheme is neither intended to be or sufficient enough to save every job,” Harrison continues.
“It seems inevitable that unemployment levels are still set to rocket as the Furlough Scheme comes to an end regardless of the new Job Support Scheme, particularly in sectors that have had no choice but to either close their doors for the foreseeable or significantly reduce revenue generating operations such as in the events and entertainment industry. The impact will be more far reaching as will also have an impact on the many suppliers to these sectors too.”
“The Job Support Scheme will help to stem some of the rise in unemployment this Autumn,” says Torsten Bell, Chief Executive of the Resolution Foundation. “But design flaws in the scheme mean that, despite existing until April, it has really only moved the jobs cliff-edge from October to January, when the full impact of the virus is still expected to be with us.”
“As an online job advertising company, we feel very fortunate at JVP Group to have a such a diverse client base across a wide range of sectors, as this is helping to cushion the impact.” Harrison adds.
“It is great to see some companies are still in a position to drive forward with business plans and growth, and we’ve noticed this particularly within certain industries such as construction and housing, IT and telecoms and accountancy firms, who have increased demand for skilled workers.
“With almost three million workers estimated to still be on furlough, there’s no denying this latest intervention from the government will be welcomed, but the degree in which the additional support will help ease unemployment levels in the UK will only become clearer over the months to come.”