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What do the chancellor’s latest plans mean for employers?

14 Jul 2020 By Melanie Lane

Melanie Lane explores the new measures Rishi Sunak has introduced to help the economy bounce back from coronavirus

The new job retention bonus scheme pays employers £1,000 per employee and is aimed at encouraging firms to retain staff who have been furloughed until at least January 2021. It is now clear that the coronavirus job retention scheme (CJRS) will not be extended past 31 October 2020. 

To be eligible, employees must earn above the lower earnings limit (£520 per month), on average, between the end of the CJRS (31 October 2020) and 31 January 2021. Payments will be made from February 2021. Further detail about the scheme will be announced in the next few weeks. At this stage we do not know how this will affect employers that have already brought furloughed staff back to work and whether this bonus will be paid for those employees.  

It appears that unlike the grants under the CJRS, this payment does not need to be passed on to the employee but is a bonus to be paid to the employer. The aim is clearly to discourage redundancies and incentivise businesses to take a longer-term view. However, for many employers experiencing serious and imminent cash flow problems, a payment of £1,000 per employee in February may not be enough to prevent difficult decisions being made before then. Other employers may feel that the financial impact of the pandemic is likely to be felt well into 2021, and that retaining employees for the purposes of claiming under the scheme is simply delaying the inevitable.

Impact on proposed redundancies

Many employers have already started planning or effecting redundancy processes. Employers that are currently consulting with staff and trade unions should consider discussing this development with employees or their representatives as part of the redundancy consultation process. The scheme could be discussed as part of an alternative to redundancy proposals. 

However, as there remains great uncertainty about the economic recovery and fears of a second wave of coronavirus, the difficulty for many employers is likely to be that they won’t be able to say for certain how many employees that they bring back from furlough will be retained in January 2021. The revenue they are likely to be able to claim under the scheme may be difficult for them to predict. 

For employers that are still contemplating whether they need to make redundancies, the scheme may incentivise them to bring back more staff back from furlough, potentially on reduced hours, if the rules permit this. 

Support for younger workers 

The chancellor also announced a support package for younger workers and apprentices. The ‘kickstart’ scheme will pay UK employers that create new meaningful jobs for 16 to 24-year-olds who are claiming universal credit and are at risk of long-term unemployment. These must be new jobs, with a minimum time commitment of 25 hours per week and staff must be paid at least the national minimum wage. If the new job meets these conditions, the government will pay the young person’s wages for six months, plus an amount to cover overhead costs. This means that, for a 24-year-old being paid the national minimum wage, the grant paid to the employer will be around £6,500. 

Measures include:

  • £1,000 bonus per trainee for an employer that takes on a new trainee aged 16-24, aimed at tripling trainee numbers; and
  • employers will be paid £2,000 to hire a young apprentice (those under 25) and £1,500 for hiring apprentices over 25. 

These new incentives will operate from 1 August 2020 to 31 January 2021. The payments will be made in addition to the existing £1,000 payment the government currently provides for new 16 to 18-year-old apprentices, and those aged under 25 with an education, health and care plan.

Melanie Lane is an employment partner at CMS

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