The Chancellor’s ‘Plan For Jobs’: What does it mean for you?

As the UK continues to emerge from lockdown and with changes to the furlough system coming into play next month, the Chancellor, Rishi Sunak, today unveiled his latest plans to boost an economy hit hard by COVID-19.

Following the so-called ‘Coronavirus Budget’ in March – delayed as a result of last year’s General Election – and subsequent announcements in the aftermath of the COVID-19 outbreak, today’s statement focused on moving forward and lifting the UK out of lockdown. With the next annual Budget due in autumn, today’s ‘plan for jobs’ has been dubbed an ‘emergency mini-budget’. Here’s a brief overview of what the Chancellor announced and how it might affect you and your business:

New ‘Job Retention Bonus’

As part of his ‘economic recovery plan’, the Chancellor said he wanted to ‘give businesses the confidence to retain and hire’. In his opening statement to the House, he said the furlough scheme had been a ‘lifeline’, but one that ‘cannot and should not go on forever’. That said, fears were growing about spiralling unemployment once the scheme closes completely later in the year.

As such, Mr Sunak announced that businesses bringing back furloughed employees will receive a one-off, £1,000 payment for each furloughed employee they retain. This is on the condition that the worker is employed until at least January with average earnings of £520 per month (the Lower Earnings Limit). The bonuses will be paid in February 2021.

This unique incentive applies to any business that has made use of the Coronavirus Job Retention Scheme (CJRS) – including those who have already brought staff back from furlough.

We’re awaiting the announcement of further details at the end of July but early signs suggest that Limited Company Directors, who furloughed themselves from their own ltd co, will be able to claim this bonus.

Participation in the CJRS has been, and remains, completely voluntary. Employers are not obliged to make any furlough payments. The costs can be significant and employees have no legal entitlement to them. So, for participating businesses, this may prove a useful, if unexpected, bonus.

Job Schemes & Employment Opportunities

With fears increasing over mounting unemployment, particularly amongst young people, the Chancellor has announced a ‘£2bn kick-start scheme’, to create hundreds of thousands of jobs for 16-to-24-year-olds. The scheme is open to all UK employers and the Chancellor’s plan is for the government to subsidise 100% of a workers’ minimum wage up to 25 hours a week for six months, with company bosses able to top up pay thereafter.

Further to this, the government is pledging to provide 30,000 new traineeships to help young people into work. These courses, which combine classroom-based lessons with work placements, can last from six weeks up to six months and are aimed at 18-to-24-year-olds in England.

Unlike a typical apprenticeship, employers are not required to pay the trainees for work carried out in their placement. Though, at the end of each scheme, the individual should be offered an interview for either a job or apprenticeship, where available.

The scheme, worth £111m, will see businesses in England get £1,000 for every new work experience placement they create for trainees. Similar schemes in Scotland, Wales and Northern Ireland will receive £21m worth of funding. Companies have also been offered a £2,000 incentive to hire apprentices aged 24 and under, and £1,500 to hire apprentices over the age of 25.

VAT Cut

In a bid to increase peoples’ spending, a six month, 15% slash in VAT – from 20% to 5% – has been brought in for the tourism and hospitality sectors. The cut in sales tax applying to businesses like food, accommodation and attractions, will start next Wednesday (July 15th) and last until January 12th. The measure comes after the Bank of England recently forecasted a 14% slump in GDP. Mr Sunak said the “£4bn catalyst” would protect “over 2.4 million jobs”.

‘Eat Out to Help Out’

With many people missing out on birthday parties and meals out with friends and family over the last few months, the restaurant industry has suffered massively. So, the Chancellor is aiming to give it a shot in the arm later in the summer.

For the month of August 2020, diners will receive 50% off meals out at participating venues in a bid to get people eating out again. The discount – labelled ‘Eat Out to Help Out’ – will apply on Mondays, Tuesdays and Wednesdays, and is worth up to £10 per head for adults and children.

Stamp Duty

The threshold for residential stamp duty, which is the tax on buying land or properties, has been temporarily lifted until March 31st on all properties in England and Northern Ireland to £500,000. It was previously charged on residential properties costing over £125,000 – with an exemption for first time buyers.

Coronavirus Job Retention Scheme

Opposition parties including Labour and the SNP called for an extension to the CJRS, but the Chancellor’s Job Retention Bonus is a scheme designed to move on from the CJRS. To refresh your memory, here’s how the CJRS will wind down over the next few months:

• The CJRS will continue in its current format until the end of this month, with the government subsidising 80% of pay for those eligible. The scheme closed to all new entrants at the end of June.

• Employers already have the flexibility to bring furloughed employees back into work part-time AND claim 80% of their employees’ wages for any ‘regular hours’ they haven’t worked. Employers are free to decide the hours and shift patterns of their staff but are responsible for paying them for any hours they do work. Otherwise, employees can remain furloughed for the remainder of the scheme.

• In August, while the government will continue to subsidise 80% of gross pay, employers will be required to pay pension contributions and Employer’s National Insurance Contributions (Er NICs) themselves.

• As well as pension contributions and Er NICs, from September, employers will also be required to contribute 10% of their furloughed workers’ pay (the government will cover the other 70% of any unworked hours – up to a cap of £2,187.50).

• The employer’s contribution will double to 20% at the beginning of October, on top of the usual pension and Er NI contributions. At this stage, the government will pay 60% of employee wages – up to a cap of £1,875 – for any hours the furloughed employee has not worked.

• The CJRS will then close in November 2020.