25 Sep 2020
Chancellor Rishi Sunak has announced a new scheme to replace furlough as we head into winter.
It’s unusual for a Chancellor to cancel one of the Government’s financial set pieces of the year. In this case, the Autumn Budget planned for November has been shelved. However, Rishi Sunak explained to fellow MP’s that these are unprecedented times. Following this, he set about announcing the latest Government proposals.
The calls for a replacement—or the extension of—the furlough scheme only increased following the latest announcement from the Prime Minister. The latest COVID-19 restrictions will impose restrictions on many businesses for at least another six months.
Naturally, organisations were starting to feel anxious. This anxiety wasn’t helped by the furlough scheme coming to an end. Many were, and perhaps still are, considering redundancies as a result.
The Chancellor’s answer to this issue is the Job Support Scheme. This will replace the Job Retention Scheme, beginning in November, and lasting six months.
The Job Support Scheme
How does it work?
Under the Job Support Scheme, employees must work a minimum of 33 per cent of their hours and be in “viable” jobs. For the remaining hours not worked, the government and organisations will each pay one-third. This means, the Treasury said, that employees working 33 per cent of their hours will receive at least 77 per cent of their pay.
Of this 77 per cent, the divide is therefore 55 per cent paid by the organisation and 22 per cent by the government. The 22 per cent Government contribution is however a maximum. For someone working 50 per cent of their hours, the government's contribution would fall to 17 per cent on a sliding scale.
The level of grant will be calculated based on an employee’s usual salary, capped at £697.92 per month.
Who is eligible for the Scheme?
The scheme will be open to small and medium-sized firms across the UK. You don’t have to have previously used the furlough scheme. However, larger businesses will need to show a loss in turnover to apply—further guidance is expected on this.
Does this impact upon the Job Retention Bonus?
No, the new scheme is designed to sit alongside the Jobs Retention Bonus. It could be worth over 60 per cent of average wages of workers who have been furloughed – if they’re kept on until the start of February 2021. Organisations can benefit from both schemes in order to help protect jobs.
What have been the initial reactions to this?
The head of the CBI and the TUC General Secretary were both photographed outside Number 11 Downing Street with the Chancellor before his announcement. Their initial support for his proposals is not perhaps surprising.
For the CBI, Dame Carolyn Fairbairn said: 'These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter. Employers will apply the same spirit of creativity, seizing every opportunity to retrain and upskill their workers.'
TUC General Secretary Frances O’Grady agreed that the job scheme will provide a lifeline for many firms with a viable future beyond the pandemic. 'A National Recovery Council should now be convened,' she continued, 'bringing together government, business and unions. We can use the winter months to plan an economic spring, with fair rewards for key workers and good new jobs in green industry.'
The full text of the Chancellor's speech can be found here.
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