Today, the Chancellor Rishi Sunak announced the headline details of his Winter Economy Plan in recognition that the virus restrictions are likely to continue for the next 6 months and that the corresponding impact on business continues to be huge.

The Chancellor stated that it is right to end the Furlough /Coronavirus Job Retention Scheme on 31 October. In his view, it would be wrong to hold jobs open that would only exist within the vacuum of the Furlough Scheme.

Instead from 1 November 2020, a new Job Support Scheme will commence based on a similar Scheme operating in Germany. This new Scheme is supported by both Frances O’Grady of the Trade Union Congress and Carolyn Fairbairn of CBI.

Whilst the Job Support Scheme is certainly less generous and more expensive to businesses than the Furlough Scheme, it is a very welcome development. It is hoped that this Scheme will help businesses with a depressed demand retain employees in viable jobs.

What we know about the Scheme so far is that:

  1. The purpose of the Job Support Scheme is to directly support the wages of people in work, giving businesses who face depressed demand over the winter the option of keeping employees in a job on shorter hours rather than making them redundant.
  2. The Scheme will support viable jobs so employees must be working at least a third of their usual hours and be paid for that work, as normal, by their employer.
  3. Thereafter for the remaining hours not worked, the Government will pay a 1/3 of the pay for those hours not worked and the employer will also pay a 1/3 of the pay for those hours not worked. The Government contribution is capped at £697.92 per month. The employee will keep their job and receive at least 77% of their wages (where Government contribution has not been capped).
  4. Anyone employed as of 23 September 2020 is eligible, but the employee must not be on redundancy notice.
  5. The Scheme will run from 1 November 2020 to April 2021.
  6. All small and medium sized UK businesses (with a UK bank account and UK PAYE Scheme) are eligible to apply.
  7. Larger businesses (not yet defined) are eligible but only when their turnover has fallen, and it is expected that larger business will not be making capital distributors (such as dividends).
  8. Businesses are eligible even if they have not previously furloughed workers.
  9. Employers retaining furloughed staff on shorter hours can claim both the Job Support Scheme and the Job Retention Bonus. This is to incentivise employers to bring back previously furloughed employees.

Other aspects of the Winter Economy Plan include a continued deferral of VAT this year through a New Payment Scheme. Rather than paying one lump sum in full at the end of March 2021 businesses will be able to make 11 smaller interest-free payments during the 2021-22 financial year.

In relation to loans, HMRC is extending the time period to apply for coronavirus loan schemes until the end of the year. There will also be a new, successor loan programme, set to begin in January 2021.

More flexibility will be given to repay Bounce Back Loans through a new  “Pay as you Grow” flexible repayment system.

There is also an extension of the Self Employed Income Support Scheme.

The announcement and current details of Plan can be viewed here