Chancellor of the Exchequer, Rishi Sunak, has unveiled his ‘Winter Economy Plan’ in which the Jobs Support Scheme will replace the Furlough Scheme on 1 November 2020 and run for 6 months.
The Job Support Scheme is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce.
How will it work?
The company will continue to pay its employee for time worked, but the cost of hours not worked will be split between the employer, the Government (through wage support) and the employee (through a wage reduction), and the employee will keep their job.
The Government will pay a third of hours not worked up to a cap, with the employer also contributing a third. This will ensure employees earn a minimum of 77% of their normal wages, where the Government contribution has not been capped.
A bit of context:
- Employers will pay employees for their work
- The government and employers will each cover one-third of the lost salary for employees until they can work
- The grant will be capped at 697.92 per month
- All small and medium sized businesses will be eligible for this scheme
- It will be open to employers across the UK even if they have not previously used the Furlough scheme
If an employee works 33% of their normal contracted hours the government and employer would pay an additional 22% each of the employees usual wage bringing their earnings to 77%.
Other points to consider within the ‘Winter Economy Plan”
Bounce back loans:
Sunak announced a ‘Pay As You Grow” scheme to allow businesses to pay back bounce back loans over a period of up to 10 years. Loans will be extendable from 6 to 10 years; businesses that are struggling can choose to make interest only payments; and anyone in trouble can apply to suspend repayments for up to 6 months.
VAT to stay at 5% for the hospitality and tourism industries until March 31 2021.
The aim of this was to support more than 150,000 businesses and protect 2.4 million jobs in hospital and tourism through the winter.