The Government and employers will carry on topping up workers’ wages when the furlough scheme winds down at the end of the month.
With the job retention scheme ending on 31 October 2020, Chancellor Rishi Sunak announced the job support scheme will kick in on 1 November 2020.
It aims to prevent mass redundancies by helping employees who have not been able to return to full-time work due to COVID-19.
Sunak said the new scheme will “support only viable jobs”, rather than jobs that simply exist because of the furlough scheme.
The Chancellor acknowledged that he “cannot save every business or every job” but said the approach to supporting people’s jobs “must evolve”.
Employers who use the job support scheme can also still claim the job retention bonus, where the Government pays £1,000 for every furloughed worker who returns to work until at least 31 January 2021.
How will the job support scheme work?
The Government will subsidise the wages of employees who are working fewer hours than normal due to lower demand as a result of coronavirus.
Staff who work at least a third of their usual hours from 1 November 2020 will be eligible for the scheme.
Employers will pay staff for the hours they work. The Government and the employer will then pay one third each of the employee’s lost pay.
Grants will be capped at £697.92 a month for six months, until 30 April 2021.
All small and medium-sized employers will be eligible for the scheme, along with larger firms with reduced turnover from the pandemic.
Businesses do not need to have used the furlough scheme to qualify for the job support scheme from next month.
Comparing it to the furlough scheme
The job support scheme is less generous than the furlough scheme but more flexible, essentially encouraging employers to give staff as many hours as they can or need to.
The Government contribution to workers’ pay will fall from an initial 80% of a monthly wage up to £2,500 when the furlough scheme started in March, to 22% of a monthly wage from November.
It will cost the Government an estimated £300 million a month, compared to more than £39 billion paid out through the furlough scheme to date.
Costs will increase for employers who use the job support scheme. In March, they had the option to pay 20% towards a furloughed worker’s salary. In November, they will have to pay a third of the lost pay on top of the hours the employee actually works.
Employers have an extra two months, until 30 November 2020, to apply for four business loans. The deadline for new applications was due to expire on 30 September 2020.
This applies to the coronavirus business interruption loan scheme (CBILS), the equivalent for larger firms, bounce-back loans (BBLs), and borrowing through the future fund.
To try and avoid businesses running into a cashflow crisis, repayment terms under the BBLs and CBILS can be extended from six to ten years. This sharply reduces monthly repayments for around 1.6m firms.
Double VAT boost
A cut to the standard rate of VAT – from 20% to 5% – for businesses in the hard-hit hospitality and tourism sectors will remain in place until 31 March 2021.
In addition, businesses that deferred their VAT payments between 20 March and 30 June 2020 will no longer have to pay a lump sum on or before 31 March 2021.
Instead, the Government is offering the option to split this repayment into smaller, interest-free payments over the course of 11 months – potentially benefiting up to 500,000 firms.
Speak to us about any of the new measures.