Furlough replacement revealed

The Job Support Scheme will begin in November aimed at protecting workers with “viable jobs”.

With the Coronavirus Job Retention Scheme due to end on the 31st October, a huge number of employers will have to start paying 100% of their staff’s wages. The hope was we’d all be back to normal by then.

But we aren’t. Restrictions on movement are gradually being reintroduced, with 10pm curfews on pubs and restaurants. We’re being encouraged to stay home more too, and told this could carry on for six months if not more.

This is going to hinder those businesses that have been struggling. And some industries haven’t even got back up and running such as travel and entertainment. If there’s no money coming in, there’s no money for wages.

That means the end of furlough will undoubtedly mean redundancies for a huge number of workers. So there’s been a huge amount of pressure on the Chancellor Rishi Sunak to do something.

In response we got a surprise Winter Economy Plan, announced today in Parliament. Here’s what was included (I’ll update it when we get more information over the coming days and weeks).

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Furlough will end

As planned the scheme will finish on 31st October, with businesses expected to contribute 20% from the start of that month, the Government paying the other 60%.

New Jobs Support Scheme

Replacing furlough is the Jobs Support Scheme. It’s a wage subsidy designed to support “viable jobs” – which means only those where people can work will be able to benefit.

At least one-third of normal hours must be worked, and paid as normal by the employer.

Then it gets a little confusing. Of the remaining time not worked, the Government will pay a third of that, and the employer another third.

If it’s the minimum one third, then an extra 22% of the total salary will come from the employer and the same from the Government. This means people will get 77% of their wages for working a third of their hours.

And say someone works 50% of their hours, an extra 17% comes from each source, and the employee will get 83.3% of their salary.

The idea is that employers can keep people in work on shorter hours rather than make them redundant. So if there’s not enough money coming in to pay for two people, this could mean two people working shorter hours to keep them both in work.

We don’t know yet whether reduced hours means reduced pension contributions or holiday entitlement. There’s also a cap on Government contributions which stands at £692.92 per month.

Employers and employees don’t have to have been part of the furlough scheme. That means people who have continued working might now find themselves asked to reduce hours.

For businesses that did use furlough, they’ll be able to combine it with the Jobs Retention Bonus announced in the summer.

It’ll run for six months from start of November.

The scheme is targeted at small and medium-sized businesses. Larger ones can only apply if they are really struggling.

Excluded still excluded

The Chancellor made a point of saying he can’t save every job – and nothing was mentioned to help the estimated three million people who didn’t benefit from previous schemes.

Nothing for struggling sectors

There was also nothing announced for those industries where it’s unlikely things can pick up. This could signal huge job cuts by affected businesses.

Self-employed grant extended

The Self-Employment Income Support Scheme is going to be extended until 30th April 2021, but the grants will now only cover 20% of average monthly trading profits – and only for those who are impacted by Covid. It’s capped at £1,875 for three months (November to the end of January).

Business loans

The Chancellor made a point of saying the remaining support was about cashflow for businesses. To do this there are deferments for loans and tax payments.

Bounce Back loans (£38bn has been lent to more than 1million businesses) will be supported by a new “Pay as you Grow” scheme. Loans can be extended from six to 10 years, reducing monthly payments. They can also make interest-only payments or suspend for up to 6 months if really struggling.

The government guarantee on the Business interruption Loans extended for up to 10 years.

All the schemes are also now open for new applications until a later date of 30th November, with a new one replacing them in January.

Tax deferments

If you fill in a self-assessment tax return you’ll be able to spread any tax due over 12 months from January.

Businesses will also be able to defer VAT again, allowing them to pay it back over 11 months rather than all at once in March next year.

VAT cuts to stay

Since mid-July, hospitality and tourism businesses have had their VAT rate cut to 5%. It was due to go back up to 20% in January, but it’s been extended until 31st March.

As we saw in the summer there’s no guarantee that will be passed onto customers, with many businesses using the money to help cover losses.

Budget scrapped

We were due to have a full annual Budget in the winter, laying out the government’s financial policies for the year, if not beyond. That’s now been cancelled.

They have to hold one each financial year so expect one in March 2021.


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