Date10 Jul 2020
The Chancellor has announced a number of measures aimed at mitigating the impact of the COVID-19 pandemic, with a commitment to stimulate consumer spending and encourage job creation through a government plan for jobs.
The stark backdrop is one of some nine million jobs furloughed, comprising a quarter of the UK workforce. Working hours were 27% lower in April 2020 than they were the previous April, the number of vacancies in May were 62% lower than the previous May and the number of paid employees fell by 612,000 over April and May. These headline figures leave us in no doubt about the impact the pandemic has had on the UK economy.
The Furlough Scheme has helped employers pay the wages of 9 million employees across the UK and 2.7 million people have benefited from the self-employed income support scheme. As the economy now starts to re-open, the Chancellor has announced his plan for jobs as the next supporting stage following these schemes, neither of which were intended to be permanent solutions.
The measures announced today are described as “interim” ahead of a third phase to be set out in the Autumn, and intended to provide temporary and targeted support for business through the recovery period whilst seeking to minimise longer term structural damage. It was a statement focused on jobs; job creation and job protection. With it came a package of measures designed to support businesses who bring employees back from furlough leave and who create new jobs.
Any employer who brings back a furloughed member of staff will receive a £1,000 bonus per employee. This is dependent on the employee being continuously employed through to the end of January 2021. Employees must have been paid at least £520 per month between 1 November and the end of January 2021, with payment being made to the employer in February 2021. This is a grant payable to the employer, and not a bonus payable to the employees returning to work.
The expectation is that those employers who have already brought employees back from furlough leave will also benefit from the Job Retention Bonus, meaning there is no disadvantage to businesses bringing staff back earlier than 31 October 2020. Businesses who quickly furloughed staff at the beginning of lockdown, and then brought them back after the minimum three weeks, as their businesses weathered the storm well, will also benefit. Unfortunately, those who decided not to furlough at all, and employers in the hospitality and leisure sector with employees who are on zero-hour contracts and may not meet the £520 average monthly wage, will not qualify for the bonus. There will therefore undoubtably be employers who will miss out on some much needed cash support.
It will be interesting to see if the payments are automatic or need to be applied for, and more detail will follow at the end of July.
The Kickstart scheme is a £2bn fund for employers to create high quality six-month work placements for any 16-24 year old receiving Universal Credit and deemed to be at risk of unemployment. The government will pay young people’s wages for six months, plus an amount for overheads, which is expected to give employers a grant of around £6,500 for each employee taken on. This funding is conditional on these being new jobs, paid at national minimum wage and for at least 25 hours a week plus the associated employer National Insurance Contributions and automatic enrolment contributions. Employers will be able to apply from next month, with the first Kickstarters in jobs in the Autumn.
It is not clear from today’s announcements who would be classed as “at risk of long-term unemployment”, but this could exclude university graduates and other highly qualified individuals, being more targeted to the low-skilled unemployed.
Clearly the Government is hopeful that the six-month placements will lead to long-term employment and that this will truly result in job creation rather than a deferral of unemployment. There was no time limit announced on the scheme, indicating it will be a first-come, first-served fund.
The Government will provide additional funds for traineeships in England, to support high quality work placements and training for 16-24-year olds. The government will pay employers £1,000 to take on new trainees, with the aim of tripling the number of level 2 and level 3 courses, at a cost of £100m. A traineeship is an unpaid position for 16-24-year olds who have little or no work experience and are below Level 3 qualified. The traineeships last up to six months and are designed to equip the trainee with the experience they need for an apprenticeship.
Over the next six months the government will pay employers to create new apprenticeships, with a grant of £2,000 per apprentice hired under the age of 25 and £1,500 for hiring those aged over 25 hired between 1 August 2020 and 31 January 2021. This payment is in addition to the existing £1,000 payment the Government already provides for new 16-18-year-old apprentices.
Early indications are that all payments made to employers in connection with the above funds ill be taxable payments, as was the case with the Coronavirus Job Retention Scheme grants.
The announcement outlined the provision of support for businesses in the hospitality and accommodation sectors, and at leisure attractions, to help them re-open. There is a VAT cut from 15 July to 12 January 2021, reducing the rate from 20% to 5% for six months.
The reduced rate of VAT will apply to supplies of food and non-alcoholic drinks from restaurants, pubs, bars, cafés and similar premises across the UK. The cut will also apply to hotels, guest houses and similar accommodation as well as admission to attractions such as cinemas, theatres, zoos and theme parks.
Overall, these measures represent the next steps as the economy starts to move forward. Businesses are fundamental to any recovery and these initiatives are designed to support business and provide financial support as they start to re-engage with their workers and get back to some form of normality. No doubt further supporting information will be issued by the government over the next few days and we will post further updates as appropriate.
We are of course here to help and we will provide further updates as and when more information is published. If you would like to discuss these changes announced or the support available, or have any other queries, please get in touch with your usual Wilkins Kennedy contact.
Please also refer to our insights page for further COVID-19 related information, which is regularly updated with the latest news, insight and details of the economic support and measures as they are announced by our Government.