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Chancellor Rishi Sunak announces new wages scheme to help businesses survive the winter

Written by Latifa Yedroudj on Tuesday, 13 October 2020. Posted in Politics, Analysis

The government will pay two-thirds of wages to staff at businesses that have no choice but to close down for a period of up to six months

Chancellor Rishi Sunak announces new wages scheme to help businesses survive the winter

The government will pay two-thirds of wages to staff at businesses that have no choice but to close down for a period of up to six months

As the coronavirus pandemic continues to sweep the globe, the government is now enlisting new measures to protect businesses as many are struggling to stay afloat, with Britain’s economy taking a massive hit during these unprecedented times. Chancellor Rishi Sunak has announced an expansion of the Job Support Scheme to help businesses survive the difficult period to come. 

On Friday, Mr Sunak announced that hundreds of millions of pounds will be spent paying workers at companies forced to close by new coronavirus restrictions. The scheme will see the government support eligible businesses by footing two-thirds of each employee’s salary, up to a maximum of £2,100 a month. However, firms will need to pay national insurance and pension contributions. The scheme will begin on November 1 for six months and will be reviewed in January. Business eligible for the scheme includes those that are legally required to shut down over some time during the pandemic as part of government guidelines, and will receive grants to pay off their workers. These also include businesses in the food and beverage, who have been forced to close their premises down and can only deliver goods or provide collection services. According to the scheme, firms can only apply while they are subject to restrictions and employees must be off work for a minimum of seven consecutive days. 

The current furlough scheme, which is due to close at the end of October, offers to pay up to 80% of workers’ wages with a cap of £2500 a month. However, the support provided from the scheme decreased to 60% with a cap of £1,875. The scheme also required contributions from employers from July. In contrast, the expansion of the job support scheme will not require any contribution from employers while providing similar levels of support. The original Job Support Scheme will sit on the top of the newly expanded scheme. 

However, there have been rising concerns over whether companies already excluded from the Job Support Scheme could benefit from this plan, and insisted large businesses should be given the ability to benefit from the scheme. 

Nigel Morris, employment tax director at MHA MacIntyre Hudson said: “The Chancellor’s new scheme is being billed as an expansion of the Job Support Scheme, not a continuation of the older Job Retention or furlough scheme. This could be a major issue for larger companies as support from the JSS is restricted, for large companies, to those that have seen a fall in turnover during the crisis.  

“Today’s announcement could mean a large business, with strong turnover but required by lockdown rules to shut down, can’t take advantage of the Treasury’s offer to pay two-thirds of employees’ wages because it’s barred from the JSS scheme. Despite the fact that the closure will of course affect its ability to retain staff. 

“Another related pitfall is that the administration of JSS could now become very complex for a business if it has employees at various locations. For example, some employees in one area of the country might be on ‘standard’ JSS for the pay period while others, trapped in a Covid-19 hotspot and forced to shut down, need to go on ‘enhanced’ JSS for all or part of a pay period. Finance and payroll staff will have a lot to contend with in this situation.  

“We have to hope that when more details emerge this expansion of the JJS covers all businesses, not just SMEs, and we have clear rules on how businesses with sites in different regions can access the scheme.” 

Meanwhile, Sunak's announcement has left some scratching their head on how the scheme will help prevent companies from making staff redundant in the next few weeks, as businesses are struggling to keep operations afloat amid the nationwide lockdown. 

Rustom Tata, Chairman of city law firm DMH Stallard and head of the firm's employment group, said: "The Chancellor’s announcement of support for those businesses ordered or required to close was very light on detail.   

"The reference to two thirds of wages being paid, will of course again be subject to limits, and there will presumably also be qualifying conditions around when the individual worker needs to have started working for the employer. 

"The further support has been described as an ‘expansion of the JSS’, but we still don’t have the real detail about how the successor to the furlough scheme is to operate.  

“With only three weeks to go, many employers and their staff in across all sectors of the economy will be concerned about the potential for further redundancies.  

"Politically, the announcement appears to help clear the way for a likely increase in the number of regional lockdowns ordered. 

"We await detail as to precisely which businesses will be ordered to close. As the First Minister in Scotland has found, describing that clearly isn’t a piece of cake." 

Meanwhile, some business leaders have lashed out at the government for neglecting the tourism industry, leaving its key workers “on their knees” without enough support to keep them afloat since the first phase of lockdown in March. 

Joss Croft, CEO, UKinbound added: “Once again the Chancellor has ignored the fact that inbound tourism businesses, that deliver £28 billion in export earnings for the UK every year, are on their knees, unable to fund viable jobs as they’ve been excluded from virtually all Government support channels since March.  

“Government has already stopped businesses trading due to measures such as quarantine and previous lockdowns, and it therefore needs to compensate all affected companies, not just those facing these new measures or with an obvious shop front.” 

The increased government support will help SMEs who are forced to shut down during the pandemic according to government guidelines. With a spike in coronavirus cases in the UK, the fluctuating numbers are a signal that businesses must prepare for tough times ahead. The extra support is crucial for small and medium businesses to help them bounce back on their feet and power through the storm.

About the Author

Latifa Yedroudj

Latifa Yedroudj

Latifa Yedroudj has joined the Elite team to fully immerse herself in the business side of journalism, a strong passion of hers cultivated from young having co-run her mother's start up business since she was 18. Her interests lie in a wide range of subjects, including start ups, business, travel, and anything entrepreneurial she can get her hands on. She has worked for some of the biggest names in journalism including The Guardian and The Mirror. Follow her on @latifayed on Twitter for her latest journo rants.

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