Is there going to be a new furlough scheme?
UPDATE: The Chancellor announced the full details of this plan on Thursday 24th September. These details are explained below:
The current Coronavirus Job Retention Scheme ends on 31st October and the government has been under pressure to extend or replace it. Many sectors are still struggling and dependent on the furlough scheme payments to retain their staff and avoid redundancies. The governor of the Bank of England urged the government to 'stop and rethink' the furlough scheme on Tuesday.
What is the Coronavirus Job Support Scheme?
The chancellor announced that the furlough scheme will come to an end as planned on 31st October 2020. He said that he had "faced no harder decision than to end the furlough scheme" but that it was "fundamentally wrong to hold people in jobs that only exist in furlough."
The government's strategy now will be to protect viable jobs, and that is what the coronavirus job support scheme will do.
With further restrictions on social gatherings and pub opening hours announced last night, the hospitality sector, in particular, looks set for a tough winter, and industry leaders had suggest that redundancies will be inevitable if no new support was announced.
How will the coronavirus job support scheme work?
How will the new furlough scheme work?
Chancellor Rishi Sunak announced that the job support scheme, replacing the furlough scheme, will be based on three main principles:
1. Support viable jobs
In order to qualify the, employees must work on at least a third of their contracted hours of work, which employers must pay.
The government will help businesses to pay the remaining two thirds. In essence, employees will be able to work shorter hours rather than be made redundant because employers cannot afford wages.
2. Job support for SMEs and small businesses
All SMEs will be able to claim under the job support scheme. Large companies will have to demonstrate a fall in turnover.
3. The Job Support Scheme is open to employers across UK
The coronavirus job support scheme will be open to all businesses across the UK, even if they haven't been using the furlough scheme.
When will the coronavirus job support scheme start?
The new coronavirus job support scheme will start on the 1st of November and will run for six months until the end of April 2021.
Package of coronavirus job support measures announced
The Chancellor also announced an extension to the self-employed grant scheme on similar conditions to the new scheme.
To assist businesses' cash flow, four new measures:
Pay as you grow bounce back loans
Paying back over 6 - 10 years with up to a 6 month suspension in repayments if necessary.
Guaranteeing business interruption loans
Loans will be guaranteed for up to 10 years and extending deadline for these to the end of the year with more new schemes announced in January.
Defer VAT bills further
So companies can pay in 11 smaller payments next year with no interest.
Reduction in VAT
For the hospitality and tourism sectors the reduction to 5% for VAT to be extended to 31 March.
We will keep you updated as any details are revealed. You can sign up to our employment law updates here.
What were the options for a new furlough scheme?
There were two leading suggestions, from the TUC and the CBI, both outlined below. It appears that the coronavirus job support scheme annouced today is similar to the German scheme currently in operation.
In summary, this would be a wages top-up from the government, so long as employees can work at least 50% of their normal hours. The business would pay the actual hours worked in full, but the employee would get paid for two-thirds of the lost hours.
Costs would be shared between the company and the Treasury and the subsidy would last up to a year.
Employees could work a smaller proportion of their normal hours and still be eligible, while they would be guaranteed 80% pay for the hours lost, or 100% if they are on minimum wage.
The BBC also outlined furlough schemes in place in Germany and France in an article on Wednesday.
How much has the furlough scheme cost the UK?
The Coronavirus Job Retention Scheme has so far cost £39.3 billion. It is unlikely that the government will simply extend the existing scheme and is most likely to offer support to specific sectors.
New Furlough Scheme: A specialist employment solicitor's view
Paul Burton, Head of Frettens' Specialist Employment & HR Team:
“The Chancellor has made it clear that the support will only be for viable jobs, hence the minimum requirement of working a third of an employee’s hours. Whether the new measures will be enough to avoid many of the predicted redundancies will have to be seen, we will carry on updating you with the information as it is released.
It is an unfortunate fact, however, that there will be redundancies and the law on them has not changed. If you do require any assistance with carrying out the procedure correctly, please do get in touch with us.”
Specialist Employment Solicitors in Bournemouth, Poole, Christchurch and The New Forest
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Employment law updates
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