Chancellor slashes job support scheme employer contributions

Firms now only required to pay 5 per cent of wages lost through short-time working and staff to put in just 20 per cent of their normal hours to be eligible

The chancellor has made the job support scheme more generous following complaints that businesses affected by local lockdown restrictions but not told to close were missing out on vital financial aid.

In a statement to parliament this morning, Rishi Sunak cut the contribution that employers on the scheme will be required to make, and reduced the minimum number of hours employees would have to work to be eligible.

Originally businesses were required to contribute 33 per cent of the wages for the time that employees on the scheme were not working. However, this will now be reduced to just 5 per cent, while the government’s contribution will increase to 62 per cent of hours not worked. Similarly, the minimum number of hours employees would need to work to be eligible has been reduced from 33 per cent of their normal hours to 20 per cent.

The more generous job support scheme would be made available to eligible companies regardless of which of the government’s three tiers they were covered by, Sunak said. 

The scheme would as such be available to those employers covered by the ‘very high’ risk tier but not forced to close because of this tier’s restrictions on some activities, he said. “So businesses that are not closed but face higher restrictions in places like Liverpool, Lancashire, South Yorkshire and Greater Manchester, as well as the devolved nations, will be able to access greater support,” he said.

In his statement, Sunak acknowledged that businesses allowed to stay open were still “facing profound economic uncertainty” and that a “significant fall in consumer demand [was] causing profound economic harm”.

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“For businesses that can open it is now clear the impact of restrictions on them, particularly in the hospitality sector, is more significant than they had hoped,” Sunak said.

The chancellor also announced a new grant scheme for employers impacted by the tier-two restrictions, to be funded centrally but administered by local authorities. It would be up to local authorities to decide how to spend the money, but Sunak said enough would be available to provide every business in the hospitality, leisure or accommodation sector with a direct grant of £2,100 for every month the tier-two restrictions applied.

He added that these grants would be retrospective, allowing businesses to backdate their applications to August. “The backdating of the new grants means we are being more generous to businesses and places that have been under higher restrictions for longer,” he said.

Responding to the statement, Labour shadow chancellor Anneliese Dodds described the government’s measures as a “patchwork of poor ideas rushed out at the last minute”.

“The deadline for large-scale redundancies came and went before the chancellor announced the job support scheme, the deadline for small business redundancies passed before he realised he needed to amend it further, and many parts of our country have spent months under tier-two restrictions without adequate support,” Dodds said, accusing the chancellor of only acting now that London and the West Midlands faced greater restrictions.

Welcoming the changes to the job support scheme, Neil Carberry, chief executive of the Recruitment & Employment Confederation, said the scheme would likely now be used by more businesses as a “realistic way to ride out the Covid recession”. But the extra range of measures announced today still failed to fully address the problems suppliers to the hospitality and leisure sector were facing, he said.

“Local grant support in higher-tier areas is welcome – and emphasises the need for all firms to talk to their local authority about the support available,” he said. “But we are disappointed by the failure to address problems caused to the suppliers to hospitality and leisure businesses by the same fall in demand. Staffing firms in hospitality will be crucial to the sector's recovery and need support too.”

Currently falling under tier-three restrictions are the regions of Liverpool and Merseyside and Lancashire. Manchester will be moved into this ‘very high’ risk category on Friday (23 October), with South Yorkshire – covering Barnsley, Doncaster, Rotherham and Sheffield – joining it from Saturday (24 October).

Areas in tier two – the second-highest risk level – include London, Essex, much of the West Midlands, Leicester, Nottinghamshire, Cheshire, West Yorkshire and North-East England. Coventry is to move to tier-two restrictions from midnight on Friday, the city council has said.