Chancellor Rishi Sunak has announced an update to the UK-wide Job Support Scheme (JSS), including for workers in England where tier 2 restrictions apply.
Instead of a minimum requirement of paying 55% of wages for a third of hours, as announced last month at the launch of the Winter Economic Plan, employers will have to pay for a minimum of 20% of usual hours worked, and 5% of hours not worked.
The government will now fund 62% of the wages for hours not worked. This more than doubles the maximum payment to £1,541.75. In the most generous case, the state will now go from funding 22% of wages to just under half.
Although the change aimed to close the gap in support for businesses in tier 2 areas, the revamped support scheme is available across the UK.
The chancellor also announced additional funding to support cash grants for struggling firms of up to £2,100 per month, mainly for businesses in the hospitality, accommodation, and leisure sector.
He said the grants would be available retrospectively for firms in areas that have been under tighter controls.
The Treasury said the value of the grants, when added to support for local authorities moving into tier 3, would be worth more than £1bn and could benefit 150,000 firms in England, including hotels, restaurants, and B&Bs that aren’t legally required to close.
The JSS replaces the furlough scheme from November.
In tier 3 areas, workers at organizations that have been ordered to shut receive emergency support.
Unions and business groups had said that many companies would not be able to use the JSS as it was and would have to make workers redundant instead.
Areas in tier 2 include London, Essex, much of the West Midlands, Leicester, Nottinghamshire, Cheshire, West Yorkshire, and north-east England. Further regions are expected to be added in the coming days.
The hospitality and leisure sectors had labeled the restrictions the “worst of all worlds” because they remove demand without so far being accompanied by additional government support.
Trade association UK Hospitality said going into tier two would put up to 250,000 jobs at risk in London alone. Chief executive Kate Nicholls said it would be “absolutely catastrophic” for the industry without further support.
“I’ve always said that we must be ready to adapt our financial support as the situation evolves, and that is what we are doing today. These changes mean that our support will reach many more people and protect many more jobs,” Sunak said.
Shadow chancellor Anneliese Dodds criticized the government for what she said was a “patchwork of poor ideas, rushed out at the last minute”.
She said its approach to support for areas entering tier-three had been shambolic.
In other political reaction, Greater Manchester mayor Andy Burnham tweeted that the new measures had not been “put on the table” during negotiations with the government this week that failed to agree a £65m package of support. “Why on earth was this not put on the table on Tuesday to reach an agreement with us?”
“Honestly, can barely believe what I’m reading here,” he said.
Against the backdrop of consternation over why the changes weren’t made earlier, employers welcomed the revamped scheme. Julian Cox, partner, and employment law specialist, law firm BLM, said: “These changes are going to very helpful for many tier two businesses facing a reduction in footfall, particularly the hospitality sector, as it effectively means employees can work fewer hours and receive greater government support, with far less of a contribution required from employers.
“For those businesses, in any tier, considering applying to the job protection scheme, a thorough review of where hours can be reduced is vital. Changes to contractual hours could prove a minefield, and employers must make sure their teams are clear on the new ways of working.
However, said Cox, the scheme was “simply not as generous as the original furlough scheme” and with this winding to a close at the end of the month, “redundancies seem inevitable”. He added: “There will be businesses that simply cannot afford to make these contributions.”
Neil Carberry, chief executive of the Recruitment and Employment Confederation said the REC was disappointed by the “failure to address problems caused to the suppliers to hospitality and leisure businesses by the fall in demand. Staffing firms in hospitality will be crucial to the sector’s recovery and need support too”.
“More can be done to protect jobs. Lowering the cost of labor by reducing employers National Insurance contributions will help boost hiring and keep people in work. Delivering on an effective test, track and trace system is absolutely essential to helping our economy recover – and businesses are looking to government to deliver on this.”
Jonathan Geldart, director-general of the Institute of Directors, said: “A substantial reduction in the employer contribution is a crucial step, reflecting our members’ concerns. Taking a national approach will help to cut through the confusion of different tiering systems and backroom political negotiations.
But he pinpointed what he called a “glaring gap”: “The exclusion of small company directors, a major part of the dynamic entrepreneurial heart of our economy, from key support schemes becomes all the more pressing as the virus wears on. It’s deeply frustrating that this issue still hasn’t been addressed.”