Chancellor Rishi Sunak has announced the government will fund nearly a quarter of the wages of workers in ‘viable’ jobs for six months as he outlined plans to replace the furlough scheme when it ends in October.
The provision will enable employers to retain staff, while moving them onto shorter hours, rather than making them redundant. To be eligible, employees must work a third of their hours, which will be fully paid by the employer.
For the remaining hours not worked, the government and the employer will both pay a third of the wages each. This means an employee working a third of their hours would receive 77% of their full pay, with the government contributing 22% of the full pay, and the employer 55%.
The new subsidy is expected to cost £500m a month, compared with the £4bn monthly cost of the furlough scheme. It will be open for all employers who have had to cut down on their employees’ hours, but it will be targeted at small and medium-sized firms.
The government wage subsidy will be capped at £697.92 per month and workers will have to work a minimum of a third of their normal hours.
From 1 November, for the next six months, the Job Support Scheme will protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19. pic.twitter.com/8NpIKpQV8y
— HM Treasury (@hmtreasury) September 24, 2020
Sunak announced he was also extending the existing self-employed grant ‘on similar terms and conditions to the new jobs support scheme’.
There will be a further grant eligible for those who have received the self-employed support previously, that will cover loss of earnings from November to the end of January. This will be worth 20% of average monthly profits, up to a maximum of £1,875.
‘The government will directly support the wages of people in work, giving businesses who faced depressed demand the option of keeping employees in a job on shorter hours rather than making them redundant,’ Sunak said.
‘The new job support scheme is built on three principles. First, it will support viable jobs. To make sure of that, employees must work at least a third of their normal hours and be paid for that work as normal by their employer.
‘The government, together with employers, will then increase those people’s wages, covering two-thirds of the pay they have lost by reducing their working hours. The employee will keep their job.
‘It will be open to employers across the UK even if they have not previously used the furlough scheme. Employers retaining furloughed staff on shorter hours can claim both the job support scheme and the jobs retention bonus.’
The chancellor said all small and medium sized business were eligible, as well as some larger businesses whose turnover has been significantly impacted by Covid-19.
‘The furlough was the right policy at the time we introduced it. It provided immediate protection for millions of jobs. But as the economy reopens, it is fundamentally wrong to hold people in jobs that people that only exist inside the furlough. We need to create new opportunities and move forward. That means supporting people to be in viable jobs that provide genuine security,’ e said.
‘I cannot save every business, every job, no chancellor could. What we can and must do is deal with the real problems businesses and employees are facing now.’