Chancellor confirms Covid-19 salary top-up scheme

Top-up scheme for next six months

Jenna Brown
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Photo: HM Treasury/Flickr CC BY-NC-ND 2.0
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Photo: HM Treasury/Flickr CC BY-NC-ND 2.0

Chancellor Rishi Sunak has confirmed a salary top-up scheme designed to minimise job losses over the next six months will be introduced on 1November as tighter Covid-19 restrictions remain in place. 

Speaking in the House of Commons, Sunak outlined the Job Support Scheme and more financial help for businesses this lunchtime (24 September).

Sunak said the resurgence of coronavirus posed a "threat to the fragile economic recovery" and protecting jobs was the government's priority through the "difficult winter months".

All small and medium-sized businesses will be given the option to cut staff hours and pay with the government and employers paying part of the lost wages. Large businesses will be eligible if their turnover has been affected by the Covid-19 pandemic.

Sunak said employees will work shorter hours rather than being made redundant. Employees must work at least a third of their contracted hours under the scheme. For the remaining hours, the government and employer will pay a third of the wages each.

This means an employee working 33% of their hours would get 77% of their salary.  He said the plan would " support viable jobs".

The measures are needed as the second wave of Covid-19 sweeps the country. Boris Johnson introduced tighter restrictions on public life as a result.

These include pubs and restaurants having to close at 10pm from today (24 September).

The furlough scheme introduced to prevent mass-redundancies at the start of lockdown in March is set to expire next month. Millions of workers are still receiving part of their salary through the scheme.

Elsewhere, the self-employed will also be offered continued support on similar terms to the salary top-up scheme. 

He also outlined a "pay as you grow" scheme for businesses which took government guaranteed loans during the crisis. pandemic. Sunak said: "Loans can now be extended from six to ten years nearly halving the average monthly repayment."

 

Industry reactions

Stephen Ravenscroft, head of Employment at full-service law firm Memery Crystal, commented: "As expected, the Chancellor has confirmed that the Coronavirus Job Retention Scheme (CJRS), which ends on 31 October 2020, will be replaced by the new Job Support Scheme (JSS). The main difference from the CJRS is that the JSS will only be applicable for employees who work (and are paid) for at least 33% of their normal working hours. There is therefore a recognition that the jobs of those employees who remain on full furlough leave at the end of the CJRS cannot be saved. 

The JSS is similar in concept to short-time working schemes in France and Germany. For the remaining hours not worked by an employee, according to a tweet from HMRC (which is not altogether compatible with the Chancellor's statement), the Government and the employer shall each pay 1/3rd of the employee's remaining wages (and the employee forgoes the final 1/3rd). We assume that this top-up shall be subject to a cap on pay similar to the CJRS. 

The JSS is not specific to particular sectors and is open to all SMEs, but larger businesses will only be eligible if their turnover has fallen through the COVID crisis."

Matthew Cady, Investment Strategist at Brooks Macdonald, said:  While today's support from the government is clearly welcome, the new jobs package does look to be somewhat less generous than before. Under the new plan, with the government paying one third of two thirds wages not earned, this equates to 22% of a person's total wages.

"That means that from the beginning of November, a company would pay a minimum of 55%, and the government a maximum of 22%. For the government, this is less than under the furlough scheme, which at the start saw the government paying up to 80%. Nonetheless, with today's fiscal actions, the government has passed the policy baton back to the Bank of England, where markets continue to hope for additional accommodation before the end of the year.