Larger businesses may be disadvantaged by new COVID-19 Job Support Scheme
The Chancellor announced today a new Job Support Scheme, where, providing an employee works 33% of their normal hours, Government will cover 33% of wages for unworked hours. The scheme will be open to all small and medium-sized businesses, but only larger businesses which have seen turnover fall through the crisis. Nigel Morris, Employment Tax Director says there is a risk some businesses in need of support will find themselves excluded.
“The definition and criteria will determine the success of the scheme, particularly the extent of a fall in turnover required for a larger business to qualify, and how this will be quantified, audited and proven. It’s not a fool-proof measure.
“We’ve seen some businesses ‘bounce back’ and may find they match last year’s performance or experience just a small drop in turnover. But in such a volatile economic environment this may not last; the next six months could be very different. A measure based on how they’ve weathered the storm so far may exclude many businesses from support, forcing them to make staff cuts if they predict tougher times ahead.
“The Coronavirus Job Retention Scheme has been very complex for businesses to administer, and much of the over claim error rate, understood to the up to 10%, has resulted from these complexities. It’s important the new scheme is simple to administer, but robust enough to avoid fraud and properly target support. Otherwise we will see more fraud, errors and mistakes.
“The ‘guaranteed’ 77% gross pay rate seems generous, especially compared to the Coronavirus Job Retention Scheme, where support is reducing to 60% from 1 October 2020. The Jobs Support Scheme will help employees and businesses to better plan rotas and finances for the next six months, but it will be interesting to see the detail, especially the position on supporting national insurance and pension contributions.
“The scheme should work well where employers can’t provide enough work for employees, but there are sadly many cases where employers can’t provide any work at all. A targeted scheme for employers who can’t provide a ‘base’ level of work should potentially also be considered.”