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The British chancellor, Rishi Sunak, has announced an expansion of the government’s new furlough scheme.
Announced alongside a package of business grants for companies in areas facing higher levels of coronavirus restrictions, the expansion comes less than a month after Sunak first announced the job support scheme (JSS) to replace furlough.
What has changed?
Under the old system announced in late September, the JSS was designed to support the wages of employees who worked at least 33% of their usual hours.
The company would pay full wages for the hours an employee worked. For the hours a worker was away from their job, the government would pay 33% of their wages, and firms would need to contribute a further 33%.
The system was designed to help companies suffering a fall in business during the pandemic and needing to put staff on reduced hours to save money.
Companies could choose to top-up pay to 100%. The scheme was due to launch on 1 November, after the furlough scheme closes next week.
Analysts at the Resolution Foundation had warned it would be more cost-effective for businesses to cut jobs, because keeping one employee on full hours would be cheaper than having two workers receiving part-time pay on the JSS.
After the changes announced on Thursday, an employee now needs to only work 20% of their usual hours to benefit from the JSS. The government has also cut the level of employer contribution from 33% – to just 5%. This means the government will pay 62% of a worker’s wages for the time they are away from their job.
According to the Resolution Foundation, the cost after the changes for a firm looking to keep a typical furloughed worker on for half their normal hours has now been reduced by 85%, falling from £233 to £35 a month.
The new system will replace the coronavirus job retention scheme – commonly known as furlough – which was launched in March to cover 80% of workers’ wages. After being gradually scaled back since the start of July, the furlough scheme included a 20% employer contribution and 60% from the government in October. Workers still received 80% of their normal pay.
It also sits alongside the coronavirus job retention bonus – which offers companies £1,000 for keeping a furloughed worker on their books until at least the end of January.
What support is available in tier 2?
The expansion of the JSS is designed to aid companies suffering a drop in business in areas subject to “high” alert tier 2 restrictions, which include curfews on opening hours and bans on people from different households meeting.
The chancellor also announced cash grants of up to £2,100 per month primarily for businesses in the hospitality, accommodation and leisure sector, which may be adversely impacted by the restrictions in high-alert level areas.
The Treasury said the grants would be made available retrospectively for areas that have already been subject to restrictions.
The Treasury said it estimated the grants could benefit around 150,000 businesses in England, including hotels, restaurants and B&Bs, which aren’t legally required to close but have been adversely affected by local restrictions nonetheless.
What support is available in tier 3?
Sunak announced an expansion of the JSS earlier this month for businesses in “very high” tier 3 alert level areas which have been forced to close their doors.
Known as the “job support scheme: closed” the system of wage subsidies is different from the “job support scheme: open” because it requires no contribution to be made to workers’ wages from businesses. It also does not require an employee to work a minimum number of hours.
Under the JSS: closed, the government will pay two-thirds (67%) of a worker’s usual wages. Employers pay no wages, although must still pay national insurance and pensions contributions.
The government has also made available business grants of up to £3,000 a month open to companies in tier 3 areas. Ministers have also pledged to provide support to local authorities for helping businesses in their local areas.
Source: The Guardian
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