Government will cover two-thirds of wages at firms forced to temporarily close

Image: HM Treasury

Two-thirds of the wages of workers in businesses forced to close by local and national lockdowns will be covered by the government under an expanded Job Support Scheme, chancellor Rishi Sunak has announced.

The scheme will support organisations across the UK that are required to close their premises due to local or national restrictions to prevent the spread of Covid-19. It will remain in place for six months, with a ‘review point’ in January.

Eligible business can claim 67% of each employees’ salary, up to a maximum of £2,100 per month. They will not be required to contribute towards wages and only asked to cover National Insurance contributions and pension contributions.

It is estimated that around half of potential claims are likely not to incur employer NICs or auto-enrolment pension contributions and so face no employer contribution, said the Treasury.

Businesses will only be eligible to claim the grant while they are subject to restrictions and employees must be off work for a minimum of seven consecutive days. Employees must have been on a Real Time Information (RTI) submission to HMRC on or before 23 September.

“Throughout the crisis the driving force of our economic policy has not changed. I have always said that we will do whatever is necessary to protect jobs and livelihoods as the situation evolves,” Sunak said.

“The expansion of the Job Support Scheme will provide a safety net for businesses across the UK who are required to temporarily close their doors, giving them the right support at the right time.”

Payments to businesses will be made in arrears and a claims portal will open in December.

The new local furlough scheme is significantly more generous that the Job Support Scheme announced by the chancellor last month – which will see the government pay 22% of wages and the employer 55% of wages for employees who have had their hours cut as a result of the crisis. However, the support is still far below the 80% of wages covered by the Coronavirus Job Retention Scheme, which closes on 31 October.

Businesses in local lockdowns in England will also be eligible for cash grants. These will be linked to rateable values, with up to £3,000 per month payable every two weeks, compared to the up to £1,500 every three weeks which was available previously.

‘Hard to turn back the clock’

Peter Meyler, head of HR analytics and consulting at Barnett Waddingham, said the changes may not save every business. “Good businesses plan for the long term and couldn’t wait for this change. They have already been preparing for the forthcoming end of the furlough scheme. They have put in place redundancy programmes to reduce their workforces, even after considering whether they could use the new Jobs Support Scheme.

“This makes it hard to turn back the clock. It’s important now that employers are communicating and engaging with their employees proactively, transparently and honestly. There’s no time or room for indecision when peoples’ livelihoods and mental health is at stake.”

Labour’s shadow chancellor Anneliese Dodds said the delay in delivering support for businesses affected by local lockdowns has caused unnecessary anxiety and job losses.

“Even at this late stage, he still has no plan to support sectors that are currently unable to operate at full capacity,” she said.

“None of this was inevitable if the chancellor had just taken his fingers out of ears and listened to the warnings from Labour and others. Businesses and families don’t have the luxury of going at Rishi Sunak’s pace when millions of jobs and livelihoods are on the line.”

The abrupt changes to the support mean that employers face further uncertainty, said Musab Hemsi, a partner at legal firm LexLeyton.

“It is clear that the economic measures are a response to increased pressure from local authority and business leaders who deem the local lockdown measures to be fatal to businesses,” said Hemsi. “The lack of clarity and abrupt changes around various rules mean many businesses and workers face an increased threat of redundancy and potentially fines for non-compliance.

“Remember we still await guidance on how employers qualify for and utilise the Job Support Scheme, scheduled to commence on 1 November 2020. It is vital that the chancellor provides immediate clarity on all of these proposals and how they will co-exist with the other current support. Failure to do so will see the landscape of many British high streets further deteriorate.”

The government has been heavily criticised for its plans to close down swathes of the northern economy in order to curb infections. Next week pubs, cafes and restaurants in many areas in the north of England will be closed, causing widespread concern that more jobs in the already struggling hospitality sector may be lost. Pubs in many areas of Scotland will also be closed.

Labour’s shadow business minister Lucy Powell told BBC Breakfast: “There’s a huge amount of frustration, and frankly fury, up here in the north at the way we are being treated by this government. They seem to be sitting in offices in Whitehall, striking a red pen through large swathes of our economy and our society.”

Greater Manchester mayor Andy Burnham said the “damage to the economy will be deep and long lasting” if the government fails to extend the full furlough scheme.

 

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