The winners and losers of Rishi Sunak’s new post-furlough jobs plan
Workers have been spared from the prospect of mass redundancies when the furlough scheme comes to an end, with the Government announcing new measures to keep people in jobs.
People who work at least a third of their usual hours will have their wages topped up by the state, Chancellor Rishi Sunak has said. Under the new Job Support Scheme, employers will pay them in full for the hours they have worked. For the remaining hours not worked, the Government and employer will pay one third each.
An employee working a third of their usual hours would therefore receive around 77pc of their normal pay in total. The scheme will run for six months from November. However the impact of the measures will be uneven, with some benefitting while others are left behind. Here we take a look at the winners and losers.
Winners
People on or returning from furlough
This could be game-changing for the three million people still on furlough and millions more who have since returned to work after being put on the Job Retention Scheme.
For many, especially those working in retail and hospitality, their positions are tenuous as some sectors are struggling to get back up and running. The wage subsidies could be key in convincing employers to keep them on at least part-time rather than making them redundant.
However experts are sceptical about how effective the support will be. For an employer with two workers, it would be cheaper to make one redundant and pay the other their full wage than to keep both on for half their hours using the new scheme.
The self-employed
Self-employed people will benefit from an extension to the grants the Government has already provided them with. Freelancers who face reduced demand over the winter months will be able to apply for a grant paying 20pc of their average monthly profits. The maximum payout will be £1,875 which will cover earnings lost between November and February.
They will then be able to apply for another grant to cover them until the end of April 2021. The Government has not yet said what the maximum for this one will be.
They will also be able to spread out their tax due in January over the following 12 months. Mike Cherry of the Federation of Small Businesses, a trade body, said this would save many from a cliff edge.
The extensions will provide a vital lifeline. Freelancers and contractors negatively affected by coronavirus were given two grants, however these only covered them for income lost over six months between March and August.
However the support is much less generous compared with the first and secound rounds of grants, which paid up to 80pc and 70pc of a freelancer's income respectively.
Self-employed people may feel hard done by only receiving 20pc of their usual pay, while employees will get the majority of theirs.
Small and medium-sized businesses
All small and medium-sized enterprises will be able to access the new wage subsidies, called the Jobs Support Scheme, to keep on employees. They will also be able to extend the terms of their loans, including Bounce Back loans and Coronavirus Business Interruption loans, to up to 10 years. This will reduce their average repayment.
The Government is also developing a new loan scheme, which will be announced in January.
Losers
Self-employed people who missed out last time
People who work for themselves and were not eligible for government support via its grant scheme will miss out once again. This includes those who have only recently gone freelance, those who make profits of more than £50,000 a year and company directors who pay themselves via dividends.
Big businesses
Large companies will only be able to make use of the jobs support scheme if their revenue has fallen as a result of the virus.
Even those who have been affected may struggle to change redundancy plans at such short notice. Companies intending to make people redundant at the end of furlough must give them notice on October 1. This means businesses have very little time to adapt their plans.
Yvonne Gallagher of law firm Harbottle & Lewis said having to pay more than the hours worked may be a concern for many. “This requirement is likely to increase administrative costs arising from managing a larger number of employees working fewer hours. Sadly some employers may find the option of early reduction in numbers a simpler option,” she added.
Taxpayers
The wage subsidies will be far cheaper than the Job Retention Scheme, however it will still add a significant amount to the billions taxpayers will have to foot to cover Covid-19 spending. Furlough cost around £11bn a month, while the new scheme will cost about £1bn a month, according to the Institute for Employment Studies, a research centre.
There has been some speculation over how the splurge will be paid for, including a wealth tax and hikes to capital gains rates, however nothing has been confirmed.
Jobs in the arts and sport
Rachael Griffin of wealth manager Quilter said: “The outlook for jobs in the performance arts sector is particularly grim as most of the venues which support this continue to be closed with no real prospect of opening for full capacity for many months.”
The same is true for much of sport. If venues are not open, they will not be able to employ people and the new scheme will fall flat.
