22/10/2020

The Chancellor’s new economic plan

Today (on 22 October 2020), the Chancellor of the Exchequer announced a new economic plan to help businesses that have been impacted by the Covid-19 restrictions. The new plan can be broken down into three parts - as summarised below by David Sheppard and Jarrad Williams.

Business Grants in England

The UK Government has announced a new grant of up to £2100 per month primarily aimed at English businesses in the hospitality, accommodation and leisure sectors who have been impacted by the COVID-19 restrictions in high alert areas. These grants will be available retrospectively and can be back dated to August.

The grants will be paid directly to the local authority. It is then the local authorities’ discretion how they distribute the funds.

These grants come on top of the higher levels of additional business support that Local Authorities who are moving into tier 3 have already received.

Self Employed Grant

The forthcoming self-employment grants have been increased from 20% to 40%, meaning that the maximum grant has doubled from £1875 to £3750.

Revised Job Support Scheme (JSS)

The initial level of support offered by the JSS was relatively modest compared to the support under the Coronavirus Job Retention Scheme which comes to an end on 31 October.  Under this first iteration of the JSS, employees were required to work a minimum of 33% of their normal hours which were paid for by the employer, and that the scheme would supplement two thirds of the “lost” hours and pay, half of which would be paid for by the employer, and the other half paid by the Government. Under this version, if an employee worked the minimum 33% hours, the employer was required to pay 55% of their normal pay, and the Government paid a further 22%.

The difficulty with this version was the high proportion employers were required to pay for employees providing part-time hours in return for modest Government support in return.  An employer deploying 3 employees on one third hours would be required to pay 165% of a full-time equivalent salary, thereby making the retention of one employee on 100% hours and pay and making two other employees redundant more attractive.

With little over a week before the end of the job retention scheme and start of the new JSS on 1 November 2020, a much more generous level of support has been announced. The minimum number of hours to be worked by an employee has been reduced to 20% which is to be paid by the employer, and two thirds of the “lost” hours will again be supplemented, however the employer is required to pay 5%, and the remaining 61.67% is met by the Government, subject to a cap of £1,541.75 per month.

Based on these figures, an employee with a normal salary of £1,100 per month will be paid £807 for working 20% of their hours, or 73% of their normal pay.  Of this £807, £283 per month is paid by this employer, and the remaining £524 would be met by the Government.

However, the employer will remain responsible for payment of employers national insurance and any pension contributions on the supplemented wage paid to employees under the JSS.

On any interpretation, the new version of the JSS is more attractive to most employers, and subject to the detail of any rules issued in advance of 1 November, may prompt many employers revise their restructuring plans to take effect after 1 November, especially when coupled with the Job Retention Bonus which will become payable in February 2021.