All About Sunak’s Furlough Replacement Scheme

Summary

• Chancellor Sunak has announced several definitive measures to protect the interest of common people and the economy
• In his winter economy plan, Sunak unveiled a Job Support Scheme specifically meant to safeguard the “viable jobs”
• The scheme will run for a period of six months beginning from November 1, 2020 and the government will be contributing up to GBP 697.92 per month-per worker
• The businesses and jobs which will be categorised as “unviable” are likely to face difficulties in the coming months

The after-effects of the coronavirus pandemic are now visible on a wide section of salaried class people, individual earners, professionals, and several small to large-scale businesses across the globe. The governments have been working continuously within their respective capacity to curb of pandemic ramifications and to reduce the burden of job losses and slowdown in the business activities.

The primary focus of the UK government has been revolving around the regularly rising Covid-19 cases, and deaths related to it following the nation is relentlessly fighting to defeat the contagious spread of the coronavirus. On the other hand, the catastrophic effects of coronavirus have eaten all the savings of middle-income groups and most of the small-scale businesses along with selective even some large-scale business pertaining to specific industries that are not allowed to operate fully or partially. The individuals related to these sectors are grappling to survive without a regular income stream.

The issues related to earnings, the sustainability of businesses, large pay cuts, lay-offs and downsizing of permanent staff can’t be left unaddressed, considering all these facts, the government has, once again, announced several definitive measures to protect the interest of common people, as well as for the greater good of economic growth.

Job Support Scheme

Chancellor of the Exchequer Rishi Sunak on Thursday, September 24, 2020, while delivering his winter economy plan, announced a raft of measures to halt the sliding economic growth, the all-round concerns over nation-wide job losses and revive the suppressed business environment, largely due to the coronavirus-led standstill.

Chancellor Sunak has announced a Job Support Scheme (JSS) that has been specifically tailored to safeguard the “viable jobs” across various small to large-scale business sectors, who are experiencing a dearth of demand due to the nearly-freeze customer spending in the Covid-19 atmosphere. The announcement from the British Finance Minister came in at a time when the Furlough Scheme, announced earlier this year, is set to complete its tenure at the end of October.

Highlights of the scheme

• The Job Support Scheme is expected to assist businesses to retain their employees going ahead.
• The scheme will run for a period of six months beginning from November 1, 2020.
• According to the norms of the scheme, the enterprises will continue to pay their employees accordingly to the time worked.
• With this, the employees can ascertain a fixed income stream for hours worked for at least a period of six months.
• While the cost of hours not worked will be respectively compensated by the employer and the government to the employee in a collective manner, helping the employee to keep their jobs.
• The cost of “hours not worked” will be divided between the government through wage support, the employee via a wage reduction and the corresponding employer.
• The government and the employer will be entitled to compensate a third part each of hours not worked with the government’s contribution limited to GBP 697.92 per month.
• Implying all the eligible employees will get paid as per their contracted remuneration for the hours worked, and the cost of up to two-thirds of their usual wages will be taken by the government and the employer in the case of time not worked.
• For availing the Job Support Scheme, employees must be on PAYE payroll (an HM Revenue and Customs system) on or before September 23, 2020 and are necessarily required to work at least 33% of their usual working hours for the first three months of the scheme.
• Post completion of three months of the scheme, the government will review the underlying principles of the scheme and will decide whether there is a window to increase the minimum-hour threshold or not.
• The claims under this scheme can be made through gov.uk from December 2020 onwards on a monthly basis.
• All the grants will be payable in arrears after the payment to the employee has been done, and the same has been reported to the Her Majesty's Revenue and Customs (HMRC).

Chancellor’s take on the scheme

The scheme has already garnered positive response from the Confederation of the British Industries (CBI). Rishi Sunak has said that –

The Job Support Scheme can be seen as an extension of the Furlough Scheme, however, the monetary aid under the latter will be relatively less. Sunak further said that we can't withstand the same level of things that we were doing at the beginning of this crisis.

Possible out-turn

The large-scale businesses that are still able to operate normally will be excluded from the scheme, while the business with falling turnovers during the crisis can avail the scheme. The businesses and jobs which will be categorised as “unviable” are likely to face difficulties in the upcoming months as all such cases will be left with no considerate support from the government’s end after October 31, 2020. Following this scenario, there is a possibility of a rise in unemployment and the people chasing their respective retirement funds to handle their daily chores. Now, much will depend on the clarity of the viable jobs’ categorisation by the government.

Conclusion

A further rise in employment could be detrimental for the businesses who had been eyeing sales rebound in the upcoming festive season. Lower the disposable income in the hands of middle-income earners; lower will be the demand for the goods and services which have already seen a severe fall in the recent past. The UK economy has already seen its worst period since 1955 in the last quarter with the gross domestic product (GDP) contracting by as much as 20.4%. The Job Support Scheme is expected to cost around 300 million pounds to the government per month for every million workers who opt the scheme. Though the cost to the treasury will be much lower this time as compared to the furlough scheme, as the contribution per worker has been capped at £697.92 per month still, billions of pounds in the six months are expected to be borne by the exchequer. On the same time, it would be an increased burden on the corporates as of the 77% of the employee wages they will have to bear the major chunk of 55% while the rest 22% being contributed by the treasury.