Your views: the Job Support Scheme doesn’t end the unemployment uncertainty

The new Job Support Scheme is supposed to be a further lifeline for at-risk jobs. But does it match up to the economic reality for most businesses?

UK Chancellor Rishi Sunak announced jobs will be ‘top priority’ this week. He revealed plans to hire a raft of job coaches to help those who have lost work during the pandemic. The announcement forms part of a raft of measures intended to address rising unemployment and includes the Job Support Scheme (JSS) which will launch from 1 November for six months.

The JSS replaces the Coronavirus Job Retention Scheme, due to end on 31 October. Under the current scheme, companies can claim up to 80% of staff wages, with a cap of £2,500 per month per employee, although the available grant has been gradually reduced since August.

The incoming JSS however, will work differently. In essence:

  • JSS is eligible to companies who are experiencing lower turnover due to the pandemic
  • The scheme will pay just over two-thirds of wages (77%) for employees who work at least 33% of their usual hours
  • The cost of unworked, reduced hours will be split between the JSS grant, the employer and the employee themselves through wage reduction
  • Employers using JSS will be paid £1,000 through the Job Retention Bonus scheme for every eligible employee they return from furlough.

But just how effective will the scheme be at retaining jobs? We put the question to some accountants to find out.

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Keeping a reduced CJRS – or sorting Business Rates – would be better

Carolyn Atkinson, director, Sheards Accountants

Continuing with the furlough scheme at 60% Government funding until March 2021 may have been a better option. I do not believe that the £1000 job retention bonus for keeping staff that were on furlough will retain jobs. It is not enough of an incentive to keep staff employed in comparison to the total payroll costs. A temporary reduction in national insurance would perhaps have been more beneficial.

Business rates remain a problem for businesses with premises making it difficult for them to compete with online suppliers. Thought could be given to increasing VAT rates by 1-2% so that ALL VAT registered businesses contribute, regardless of how they sell. Combining this with reduced business rates would help a lot of businesses in the longer term, particularly as online sales are only going to increase in future years.

Next steps: We’re advising our clients to review working patterns and in negotiation with employees, reduce hours to levels that are sustainable over the short term. Unfortunately, some redundancies will be inevitable. We also recommend reviewing all direct costs and overheads to keep them as low as possible, reducing dividend payments and a pause on private pension contributions.

Verdict: Continuing with the Coronavirus Job Retention Scheme would have done more to retain jobs than the JSS. The Job Retention Bonus is also not enough of an incentive to bring staff back from furlough.

Large businesses may benefit, but smaller ones should focus on asset cuts

Eunice Onyema, accountant and founder, Eno Accountants

JSS will be a huge support for the larger companies who don’t have reserves left to support their employees post-COVID or who are just about managing to stay above water during these times.

The biggest worries for my clients, however, is not knowing what will happen in the future. No one knows how long this pandemic will last and consequently how long we will be locked down for.

Income has dwindled by about 50-60% over the last few months for a lot of clients and many have had to reduce the number of employees in their companies to stay afloat.

Next steps: My advice to clients at the moment is to look at ways of reducing unnecessary costs such as business assets like company cars or getting rid of office space altogether and encourage staff to work from home, if possible. Some companies may be able to retain employees at a reduced salary and are looking at temporarily renegotiating employee salaries.

Verdict: Reduce unnecessary business costs if possible and offer working from home opportunities to save on overheads.

JSS could backfire due to the way it is set up

Dan Stopp, UK Accounting manager, Bokio

There is no doubt that the reduced contributions to employee’s pay via the JSS will inevitably leave businesses and clients with a tough decision to make as to the future of their workforces. Given that the new proposal will return much of the financial responsibility to the employer, its effectiveness on job retention will rest heavily on the relative durability of UK businesses.

For some clients, due to the way the JSS supplements staff salaries, it may make more financial sense for them to let go of numerous employees, and retain just one full-time member rather than maintain a healthy workforce on part-time contracts. For a lot of businesses, this is likely to be an unavoidable and necessary sacrifice, which could prove detrimental to the employer and employee, and have knock-on effects on the UK economy. The co-existing Job Retention Bonus, however, is a proactive initiative, which overtly incentivises businesses to bring back their employees from furlough.

Next steps: Accountants will need to provide clear guidance on the trade-offs associated with implementing the new JSS. Naturally, some sectors have suffered much more than others, therefore clients’ needs will have to be judged on a case-by-case basis. Accountants, on their side, will need to ensure that all viable options are considered to prioritise their client’s longevity.

Verdict: The scheme could lead to redundancies anyway because of the financial burden it will place on the employer.

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Annie Makoff is AAT Comment’s news writer.

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