Life after furlough
Today, Rishi Sunak announced how life will look after the furlough scheme ends on 31st October. From the 1st November 2020, a new Job Support Scheme will come into place. This scheme will run for 6 months. The point of this scheme is to protect viable jobs, avoiding the potential cliff edge that loomed for employers and employees at the end of the furlough period.
How does the scheme work for Employees?
The main points are:
- Employees can get upwards of 77% of their normal pay when working reduced hours
- Employees will need to work at least 1/3 of their contracted hours
- The Employer will pay for the hours that the employee has worked
- The remaining 2/3 of the employees contracted hours will be paid between the Government and the Employer
- The Government contribution is capped at £697.92 per month
- The scheme is targeted towards small and medium sized employers. Larger organisations can only access it if they can prove their turnover has reduced significantly as a result of the pandemic (further guidance will be issued when they are announced)
- Employers who have NOT used the furlough scheme can still access the Job Support Scheme
- Even if Employers have used the furlough scheme, and the Job Support Scheme, they can still access the retention bonus available in January 2021
Therefore based on a 36 hour week:
|Hours Worked||Additional Employer Contribution||Additional Government Contribution||Total % of salary received by Employee|
|12 (33%)||66%/3 = 22%||66%/3 = 22%||33+22+22=77%|
|18 (50%)||50%/3 = 17%||50%/3 = 17%||50+17+17=84%|
|24 (67%)||33%/3 = 11%||33%/3 = 11%||67+11+11=89%|
What help is there for businesses?
There were some new announcements for businesses too. The announcements mainly focussed on the loans that have been issued to businesses as a result of Coronavirus.
- The repayment terms on bounce back loans have been extended from 6 years to 10 years (“Pay as you Grow” as Sunak put it).
- Businesses can make interest only payments if they need to
- Business who are struggling to meet repayments can take a 6-month break
- Anyone using the Pay as you Grow option will not have their credit rating affected as a result
- The repayment terms on Government loans issued have also been increased to 10 years
- Any VAT repayments that were delayed do not have to be paid back in one lump sum. You can opt to pay this back in 11 instalments
- The hospitality and tourism sector will continue to benefit from VAT remaining at 5% until 31st March 2021 instead of it finishing on 12th January 2021.