Coronavirus Job Support Scheme: How does it work, who is eligible and when does it start?

Chancellor Rishi Sunak has announced plans for the government to top up the wages of workers forced to cut their hours due to the coronavirus pandemic.

The new Job Support Scheme is aimed at protecting "viable" roles, rather than all posts which have been kept going as a result of the furlough scheme.

But how will it work, who is eligible and when does it start?

How will the new Job Support Scheme work?

Under the six-month scheme, the government will top up the wages of people working at least a third of their normal hours.

They will be paid at regular rates for the hours they do work.

But with the hours on the sidelines, the government and the employer will each pay one third of the pay an employee has lost.

The Treasury explains: "Employers will continue to pay the wages of staff for the hours they work - but for the hours not worked, the government and the employer will each pay one third of their equivalent salary."

The level of grant will be calculated based on employee’s usual salary, capped at £697.92 per month.

Employers will be reimbursed in arrears for the government contribution.

Examples of how the new job scheme will work

  • An employee works nine hours a day - equal to £90 of pay

  • If they only work 1/3 of their normal hours - three hours - they will get £30 of normal pay from their employer

  • For the hours not worked - six hours - 1/3 will be paid by the employer, 1/3 by the government and 1/3 will not be paid

  • 1/3 of six hours is two hours, so an employee will receive pay for four hours not worked - equal to £40

  • So in total an employee will receive £30 for the hours worked and £40 for the hours not worked - equal to £70 of pay - instead of the usual £90

  • An employee will receive 77.7% of normal pay if they work 1/3 of their normal hours

If I usually earn £2,000 and work 50% of my normal hours, I would earn £1,000, and will receive £333 extra from my employer and £333 from the government.

So instead of earning £2,000, I will earn £1,666 - 83% of my usual earnings.

Credit: Treasury

Who is eligible?

The Job Support Scheme will be open to businesses across the UK even if they have not previously used the furlough scheme.

But the Chancellor has said the scheme will only support jobs which are viable and an employee must not be on a redundancy notice.

All small and medium-sized businesses are eligible (fewer than 250 employees), but larger businesses only when their turnover has fallen through the crisis.

The government expects that large employers will not be making capital distributions such as dividends while using the scheme.

When will it start and how long will it last?

The scheme will run for six months from November 1.

What's happening to furlough?

The new scheme was announced, as the furlough scheme is coming to an end.

The government's coronavirus furlough scheme which has helped almost 10 million jobs will close on October 31.

Furloughed workers across the UK receive 80% of their current salary, up to £2,500 through the Coronavirus Jobs Retention Scheme.

It was a lifeline for many employers, as it prevented mass redundancies, and was extended in May to the end of October.

From August, employers were asked to share the cost of paying employee's salaries.

What other new help was announced?

  • The existing self-employed grant will be extended on similar terms and conditions as the new job support scheme.

  • The temporary 15% VAT cut for tourism and hospitality will be extended until the end of March 2021.

  • A new payment scheme will give more breathing space for more than £30 billion of deferred VAT payments, allowing them to make 11 interest-free payments in 2021-22 rather than a lump sum at the end of March.

  • A “pay as you grow” measure will extend the repayment terms for bounce back loans from six to 10 years.

  • Firms which have taken out coronavirus business interruption loans will see the government guarantee extended for up to 10 years.

  • All loan schemes will be extended until the end of the year.

How much will the scheme cost?

It will depend on take-up, but could potentially cost about £300 million a month for each million employees who are in the scheme.