Summer Economic Update – Jobs

A return to some kind of normality
July 6, 2020
Summer Economic Update – Hospitality & VAT
July 8, 2020

By James Geary

James Geary
08 Jul 2020

Summer Economic Update – Jobs

 

A raft of further measures to support jobs was announced today.  The key point underpinning this is that the Job Retention Scheme cannot continue indefinitely, and hence the new support mechanisms are designed to help businesses to start bringing people back to work, rather than to continue to support those who are not working.

The two main schemes are the Job Retention Bonus and the Kickstart.

Job Retention Bonus

Following the support through the existing furlough scheme, a new scheme to support employers to bring furloughed employees back to work seems to be a logical next step, and this is what has been announced.

We are told that more details will be published by the end of July, but we have a basic framework of the scheme.

A one-off payment of £1,000 will be made to employers for each employee they bring back from furlough and employ continuously up to the end of January 2021.  In order to qualify, the relevant employees must have wages of over £520 per month on average (the Lower Earnings Limit for National Insurance).  Payments will be made from February 2021.

The further guidance will address most questions, but some of the questions which immediately spring to mind are:

  • Will this apply to people brought back from furlough from today onwards, or will this be backdated for any employees brought back from furlough already?  It is to be hoped it will be backdated because it is an incentive for previously furloughed employees to be retained into 2021, so one would think that incentive should apply to those who have already returned just as much as to those who are still furloughed.
  • Will the grant be taxable?  The likelihood is that it will be (by means of offsetting the wages expense in the employer’s accounts).  There will also be issues of timing to consider in terms of accounting for the payment – for example if the payment is received in a new accounting period but relates to employees retained in the previous period, should it be recognised in the earlier period accounts?
  • What will be the State Aid status of the payments?  The likelihood is that it will not be Notifiable State Aid, for the same reasons as the furlough scheme was not (as it is not a selective measure).

 

Kickstart scheme

The document published today on this scheme is much lighter on detail, but this is what we know:

  • A £2 billion fund to encourage employers to create quality 6 month plus job placements for 16-24 year olds.
  • The fund will pay 6 months of wages (up to the National Minimum Wage) as well as the related Employer NIC and minimum auto-enrolment pension contributions.
  • A key requirement, according to the Chancellor’s speech, is that the job must also include training and support to upskill during that period to support the individual to either continue in that job, or to help them to find other jobs much more easily.

It is not known when the further detail on this one will be published, but on the basis it is expected to be live in Autumn, this must be very soon.

Some immediate questions include:

  • Must the individual be claiming Universal Credit to qualify for this?  The Chancellor implied this, but what about any unemployed 16-24 year olds who are not claiming for whatever reason, but are nonetheless unemployed?
  • Exactly how will the required training and support be measured, and what will be the minimum requirements here?

A number of other funds and support mechanisms which are more sector targeted, or around coaching and job finding support, were also announced today.

It is good to see the introduction of this additional job support today to help people to return to work and hopefully give the economy a bit of an early boost as we start to move back to some kind of normality.

Comments are closed.