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Chancellor Rishi Sunak has announced a replacement for the coronavirus job retention scheme based on a German-style wage subsidy system.
Faced with the prospect of increased job losses this fall when licensing closes at the end of October, and tighter restrictions on the economy as the pandemic worsens, the “employment support plan” constitutes the backbone of your winter budget plan.
How does the new scheme work?
The government will contribute to the wages of employees who work less than normal hours. However, there are concerns that workers at companies forced to close due to coronavirus restrictions, where work may not be possible, will be left without support.
Employers will continue to pay their staff’s regular wages for the hours they work. For hours not worked, the government and the employer will each pay one-third of the equivalent wage.
Who is eligible?
The employee should not be on a layoff notice, in a step designed to encourage companies to retain staff.
During the first three months of the plan, the employee must work at least 33% of his usual hours. The government will review whether to increase the threshold after three months.
Employees will be able to “activate and deactivate” the scheme and will not have to work with the same employer every month. However, each short-time work scheme must cover a minimum period of seven days.
The scheme will be open to all employers with a UK bank account and part of PAYE. All small and medium-sized enterprises (SMEs) will be eligible. However, large companies must demonstrate that their business has been negatively affected by Covid-19. Large companies will have to show that their turnover has been reduced by a third.
The government said it also hoped that large employers would not pay dividends to shareholders while using the scheme.
How much will the workers receive?
For every hour not worked, the employer and the government will each pay one-third of the employee’s usual wage. The government contribution will be capped at £ 697.92 per month, much lower than the original licensing scheme’s cap of £ 2,500.
Due to the requirement to work at least a third of the usual hours, the scheme will cover wages for a maximum of 66.6% of the hours not worked. This means that the government contribution is worth 22% of the full salary.
As a result, taking together payment for full hours worked and salaries subsidized by the state and the company for downtime, employees using the scheme will receive at least 77% of their usual salary (unless otherwise specified). reduce by the government limit of £ 697.92).
If an employee works only 33% of their regular hours, the government grant would be 22% and the employee’s contribution would be 55%.
How long will the plan last?
It will run for six months from November 1 to replace the licensing plan, which ends on October 31.
The reduced-time work allowances are designed to accompany the government’s job retention bonus, announced by Sunak in its summer economic update. Under the job retention bonus, companies receive a one-time payment of £ 1,000 for each previously licensed employee if they are still employed at the end of January next year.
