The Chancellor Rishi Sunak today announced some significant changes to the way in which the Government will support businesses hit by the COVID-19 pandemic.
He has reacted to concerns raised by employers and unions, and in particular by the hospitality industry, about the level of support available to businesses that have been hit by a significant fall in demand. As a result, he has announced three main changes:
- The Treasury has pledged to fund local authorities in high alert areas with direct cash grants. It will be up to the local authorities to decide how to distribute those grants, but the Chancellor believes that there should be sufficient funds to provide every business in hospitality, accommodation and leisure sectors with a cash grant of £2,100 per month. This will be backdated to August in order to help those businesses who have been hit by higher restrictions for longer.
- The Job Support Scheme, due to come into effect from 1 November, has also been changed. Previously, businesses that were allowed to remain open were eligible for financial support if they could provide their workers with at least 33% of their normal hours. The employer would be required to pay the employee for those hours worked in full, and the Government and the employer would then contribute 1/3 each towards the salary to which the employee would have been entitled in respect of the hours not worked (up to the Government's cap). Under the new rules, the employer now only needs to provide (and pay) 20% of the employee's normal hours, and will only be asked to pay 5% towards the cost of those hours not worked (while the Government pays 61.67% of the lost salary, again up to the Government's cap. The cap has been increased, however, to £1,541.75 per month). This will apply to businesses in all alert areas, and there is no need for employers to have previously claimed under the Coronavirus Job Retention Scheme to access the scheme. Employers will need to continue to pay pension and Employer's NICs in respect of the money they pay, and may top up the employee's salary if they wish (but they are not obliged to do so if they wish to access the scheme). As before, employers should obtain the employee's agreement before they access the scheme, and employers may not dismiss employees by reason of redundancy, or give them notice of dismissal, in relation to any period within which the employer is claiming a grant for the employee.
Businesses which are legally required to close will remain subject to the previously expanded furlough scheme – in other words, the Government will pay 2/3rds of the employee's salary (subject to a cap).
- The contribution to workers who are self employed will double from 20% of income to 40% of income, subject to a monthly cap of £3,750.
This will be welcome news for many businesses, but may come too late for those businesses that have already had to take the decision to make redundancies. It is also unclear whether those businesses which have found it very difficult to continue to operate due to lack of demand (particularly in the arts and entertainment sectors) will benefit from this announcement, as it may not be economically viable for them to open even on a reduced basis.