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Chancellor of the Exchequer's announcements: what employers need to know

Posted on 8 July 2020

Chancellor of the Exchequer, Rishi Sunak, has announced a range of measures today in a speech to the House of Commons, which are designed to support the recovery of the UK economy as the lockdown restrictions continue to ease.

Employers will be particularly interested in the following aspects of the Chancellor's speech:

1. Employer "bonus"

Employers who have furloughed employees under the Coronavirus Job Retention Scheme will be eligible to receive a payment from the Government of £1,000 per employee who has been furloughed, provided the employee remains employed for three months after the furlough scheme ends in October (i.e. until January 2021). Employers must pay employees at least an average of £520 in each month between October 2020 to January 2021 in order to be eligible for the bonus.

2. Furlough extension

Disappointingly for many employers, the Chancellor ruled out the possibility of extending the Coronavirus Job Retention Scheme beyond October 2020. Whilst there is always the possibility of a U-turn, unless there is a drastic change (such as further wide scale lockdowns) it is now unlikely that employers will be able to rely on the Coronavirus Job Retention Scheme to enable them to retain employees past October 2020, and the new bonus may not provide enough of an incentive. As a result, many employers will now be left with no choice but to consider reducing their wage bill through more drastic measures, including redundancies.

3. The KickStart scheme

The Chancellor also announced a new scheme – the "KickStart" scheme. Under the KickStart scheme, the Government will pay employers to create new jobs for 16-24 year olds who are at risk of long-term unemployment. For each job created under the scheme, the Government will reimburse the employer for the first six months of the employee's wages, and make a contribution to cover overheads. For a 24 year old, the grant will be worth approximately £6,500.

In order for jobs to be eligible under the scheme, employers must prove that they are "new" jobs which would not have been created but for the KickStart scheme. Jobs will only be eligible if they provide employees with a minimum of 25 hours work per week and employers must pay employees at least the national minimum wage. Employers must also provide employees with support and training to help them find permanent employment.

Employers will be able to apply to the scheme from next month. The Chancellor confirmed that there will be no cap on the number of jobs for which funding will be available under the scheme.

4. Traineeships and Apprenticeships

The Chancellor also announced that the Government will pay employers £1,000 to take on new trainees under the already established Traineeship scheme, with triple the number of places available under this scheme going forward.

In addition, for the next six months, the Government will also pay employers £2,000 for each new apprentice they hire. In addition, employers will be paid a further £1,500 for each apprentice they hire aged 25 or over.

Whilst the new schemes will be of interest to some employers, many more will be disappointed that an extension to the Coronavirus Job Retention Scheme has been ruled out, and face having to make difficult decisions about their workforce in the coming weeks and months.

Please contact a member of our team for more information, or see our Employer FAQs and Return to Work FAQs for many of the questions facing employers in the current environment.

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