Some will more than double their furlough income, while others returning part time could see pay drop
As the government's furlough scheme draws to a close, November will see businesses supported by the newly revised job support scheme (JSS).
On 22 October, Chancellor Rishi Sunak enhanced the scheme so that employers now only need to contribute 5% to a worker's salary - rather than the previously announced 33%.
While the scheme will provide a much needed boost for some UK businesses, the scheme will affect employees in different ways, with some being able to more than double their furlough income, while others who return part time could see their pay drop, analysis by Quilter has suggested.
"Employers are the big winners from the revised scheme," said Quilter retirement planning expert Ian Browne. "They can bring staff back into work, even for just one day a week, and only have to subsidise 5% of the unworked hours. Previously, they were looking at paying someone a full day of unpaid hours if an employee returned to work two days a week. The government will now pick up a much bigger share of the tab, so it is a real pivot toward placing the burden on the taxpayer, rather than on firms. If you are a business owner looking at putting staff on reduced hours, this is a big boost.
"For staff returning from furlough some people will see their income drop even though they are returning to work. This will probably feel odd for some people. Where they were receiving 80% of income under furlough, some people will now return to work part time and receive a lower share of normal pay."
The Quilter analysis shows that many workers could be significantly better off under the new JSS, especially those who work more hours and have higher salaries that meant they were previously hitting the £2,500 per month furlough payment cap.
However, some workers could return to work part time but receive lower monthly pay than they did on furlough. This will predominantly impact those on lower salaries working less than 40% of their normal hours - equivalent to two days of a normal Monday to Friday job.
Pay under Furlough and Job Support Scheme
Source: Quilter*
Some workers could substantially increase their income if they were previously furloughed on 80% of pay. For example, someone earning £70,000 per year returning to work three days a week (60% of normal hours) will get paid £5,055.63 under JSS, more than double the furlough limit.
Anyone working at least 40% of their normal hours will receive the same or more than they were eligible for under furlough.
"As a general rule, for those people earning £40,000 and over that were hitting the £2,500 monthly limit under furlough, they will now have the opportunity to break free of that limit under the new scheme and boost their monthly income," said Browne. "The switch from furlough to this new scheme is certainly favourable for higher earners that were receiving a smaller proportion of their monthly income under the cap on furlough payments."
Those working just 20% of normal hours will receive less than they were eligible for under furlough, unless their normal annual salary exceeds £50,000 per year (£4166.67 per month).
Workers earning a normal annual salary in excess of £50,000 are better off under JSS than furlough, even if they only work the minimum 20% of normal hours, the analysis found.
Browne added: "It is entirely possible that some people will also actually welcome the opportunity to reduce their hours, especially with a portion of their income being topped up by the government. Someone at the end of their career may even find themselves using this as the tipping point toward a phased retirement with reduced working hours. Older workers may fear an increased risk of redundancy and could find it harder to get back into a new role even once the economy recovers. So the opportunity to remain with their current employer under reduced hours may really appeal to some people."
* Monthly pay assumed to be annual salary distributed evenly over 12 months. Furlough income is assumed to be 80% of normal pay, up to £2,500 per mth, although some employers may voluntarily topped-up staff incomes. JSS pay assumes employer contribution of 5% of unworked hours capped at £125. The £125 maximum contribution required of employers equates to 5% of unworked hours pay for someone working 20% of normal hours with the JSS maximum monthly ‘reference salary' of £3,125 per month (£37,500 per year). Some employers may choose to pay more than the £125. Government contribution is 61.67% up to a maximum of £1541.75, equal to 61.67% of unworked hours for someone earning the maximum reference salary (£3,125) and working 20% of normal hours.
