New Job Support Scheme to Replace Furlough

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The UK Chancellor, Rishi Sunak announced that furlough, or to give it its official title The Coronavirus Job Retention Scheme, would indeed end on 31st October 2020 as planned. This is to be replaced with a new Job Support Scheme which will start on 1st November 2020. The announcement from the UK Chancellor comes after weeks or speculation and mounting pressure to extend the current furlough scheme.

In March of this year coronavirus arrived in the United Kingdom and subsequently brought the nation to a halt. Businesses were forced to make changes with many taking advantage of the blanket furlough scheme that was put in place. Furlough allowed employers to place employees on temporary leave with the government paying 80% of the employees’ normal wage. Initially put in place from March to June we would later see the scheme extended to October with responsibility placed on employers to make more of contribution if they were still making use of the scheme. Although at the time Furlough was a very welcome lifeline for both employers and employees and has arguably kept some businesses open it was never going to last forever. The UK government has had to adapt its approach as coronavirus continues to remain a threat.

As of 1st November 2020, a new Job Support Scheme will be introduced with the aim of protecting viable jobs. Rishi Sunak has said “The primary goal of our economic policy remains unchanged – to support people’s jobs – but the way we achieve that must evolve,”. This approach is a more targeted one than that of furlough and rather than protecting jobs while businesses are closed it is aimed at allowing employees to work reduced hours while still having a large portion of their usual monthly income.

The highlights of the new Job Support Scheme are: – It will run for a period of six months – Employees will receive at least 77% of their normal salary – To be eligible an employee will need to work at least 33% of their normal hours, this will be paid for as usual by the employer – The employer will pay an additional 22% of normal salary (amounting to 55% of what an employee would usually receive) – The government will contribute a further 22% of normal salary (amounting to the 77%) – All small and medium sized businesses will automatically be eligible – Larger business will only be granted access if they can show that their turnover has been directly impacted by the pandemic – It is open to all eligible employers, even if they have not made use of furlough

At this point we don’t yet know the technical details of the new support scheme so any employer looking to make use of it should keep that in mind. As with furlough employers will need to consult with staff before any changes are implemented. Efforts to help minimise unemployment also include the Job Retention Bonus. This can be used alongside the new Job Support Scheme and will give employers £1,000 for every furloughed employee who comes back to work until at least the end of January.

There was also some positive news for those who are self-employed. Similar to the terms of the Job Support Scheme the chancellor is extending the self-employed grant. Anyone who is currently eligible for the Self-Employment Income Support Scheme will qualify for the extension. They must declare that they are actively trading and intend to continue to trade and prove that they are impacted by reduced demand due to coronavirus in the qualifying period.

The UK governments winter economy plan also includes support for businesses. This includes the introduction of “Pay As You Grow” allowing bounce back loans to now be paid over ten years as opposed to the initially planned six years. Any business struggling right now can choose to make interest only payments or can apply to suspend repayments for up to six months. The terms of other loan schemes are also changing, any business that took out a Coronavirus Business Interruption Loan will now have up to ten years to pay that back and the deadline for all loan schemes is to be extended to the end of this year. Business will now be allowed to spread any deferred VAT over 11 smaller and more manageable payments rather than having to pay the full amount when it would have been due in March 2021.

This announcement and the details within it has been welcomed by both employers and employees across the UK. Although the government are aware that it doesn’t suit every single individual, it is a further lifeline for those businesses who are still recovering from the impacts of COVID-19 and most importantly offers some job security for the employees of those businesses. The extension or temporary suspension of loan re-payments shows that the government recognise that recovery rates will differ for businesses who operate in different sectors. This allows companies to continue trading and put the focus on that of their recovery. All of this shows that time and effort has gone into the governments winter economy plan and that a more targeted approach is now the focus as we move forward.