Chancellor Rishi Sunak has announced changes to the Job Support Scheme, with extra help for businesses in areas with Tier 2 lockdowns and further economic support for self-employed workers.
The Job Support Scheme is replacing the original furlough scheme – also known as the Coronavirus Job Retention Scheme (CJRS) – which will end on 31 October.
The announcement of new and altered measures come just two weeks after the Chancellor announced extra help for businesses forced to close due to stricter local lockdown rules – ie businesses in Tier 3.
This is part of the government’s overarching Winter Economy Plan, which was first announced at the end of September. The plan aims to help individuals, workers and UK businesses of various sizes, and runs alongside existing initiatives such as the Kickstart scheme for younger workers and the Job Retention Bonus for employers that keep on staff who had been on furlough into the new year.
Here, Which? explains how the Job Support Scheme will work for closed and open businesses and other initiatives from the Winter Economy Plan. You can jump to the different sections using the links below:
- What help is there for businesses under Tier 2 lockdowns?
- How will the Job Support Scheme for closed businesses work?
- Job Support Scheme for open businesses
- What is the Winter Economy Plan?
- Help for self-employed workers
- New VAT deferral scheme
- Pay as you grow for Bounceback loans
What help is there for businesses under Tier 2 lockdowns?
The Chancellor announced a new grant scheme for businesses suffering from financial loss due to Tier 2 lockdown restrictions.
The government will be giving local authorities direct cash grants worth up to £2,100 for every month that they experience Tier 2 restrictions.
The grants are said to be enough to cover every affected business (specifically hospitality, leisure and accommodation).
Local authorities will have to decide which businesses are eligible to receive the grants, which can be backdated to August.
How will the Job Support Scheme for closed businesses work?
If coronavirus restrictions mean that your business or place of work is forced to close and you can’t work at all for one week or more, your employer will pay you two thirds of your salary up to £2,100 a month.
The government will then reimburse your employer for this cost. However, employers must cover the National Insurance contributions (NICs) and pension contributions for all workers.
This help will cover businesses that are legally required to close. The ‘normal’ Job Support Scheme will apply for open businesses that have had to reduce workers’ hours (see below for more details on this).
All iterations of the Job Support Scheme will open on 1 November, with grants being paid from early December.
The scheme will last for six months, but will be reviewed in January 2021.
Job Support Scheme for open businesses
Unlike the furlough scheme, which helped pay the wages of employees who were unable to work, the Job Support Scheme will only pay towards ‘viable jobs’ – jobs where people can still go to work, but may need to have their hours decreased as a result of the lockdown measures.
The Job Support Scheme is claimed by employers, for employees who are in work for at least a fifth of their normal hours – originally, employees had to work at least a third of their normal hours, but the Chancellor announced a reduction to this threshold on 22 October.
The employer must pay the employee for the work they carry out and for the remaining wages the employer must then top up 5%. The government will add up to 61.67% of the employee’s remaining salary. Government payments are capped at £1,541.75 per month, but employees should still receive 73% of their normal pay.
Previously, the government and employers stood to pay a third of the remaining wages each, with employees receiving 77% of their normal pay.
This aims to stop employees from having to take pay cuts and hopefully means employers can keep more staff.
Take a worker who usually earns £1,200 a month, but is only able to work half their normal hours. Their employer pays them £600 for time they’ve worked, and under the Job Support Scheme the employer would pay £30 and the government would pay £372.
Employers across the UK can claim, but it will only be open to large businesses if their turnover has decreased as a result of COVID-19. It’s open to employers who haven’t used the furlough scheme and can be claimed at the same time as the Job Retention Bonus.
- Find out more: furlough explained
Help for self-employed workers
Self-employed workers will see an extension to the grants they are currently able to claim under SEISS.
On 22 October, the Chancellor announced that, from November, self-employed workers can claim an initial lump sum of 40% of their average monthly profits (up to 3,750), covering November until January. This is up from the 20% grant (maximum £1,875) mentioned when the Winter Economy Plan first launched on 24 September.
There will be a second grant covering February to April, but the percentage of profits it covers may be adjusted.
Self-assessment tax deferral
As part of SEISS, those who pay tax by payment on account were allowed to defer their July 2020 payment to 31 January 2021 – when they would have to pay the whole of the tax owing in one go.
Under the Winter Economy Plan, those who pay tax by self-assessment can defer the payment due on their 2019-20 tax return for 12 months from January 2021. Under normal circumstances, tax would have to be paid by midnight on 31 January 2021.
- Find out more: self-employed income support scheme
What is the Winter Economy Plan?
The Winter Economy Plan is the overarching name for a collection of schemes, initiatives and tax deferrals that collectively form the government’s plan to help safeguard as many jobs as possible over the winter months.
This follows a fresh set of measures for the next six months – such as once again encouraging people to work from home, increased use of face masks and 10pm curfews for pubs and restaurants – brought in as a result of the second wave of coronavirus cases across the UK.
It’s expected that many businesses will suffer as a result of these measures, but the Chancellor said that the existing schemes – Coronavirus Job Retention Scheme (CJRS) and the Self-employed Income Support Scheme (SEISS) – could not continue in their current form, and that it would be ‘fundamentally wrong to hold people in jobs that only exist inside the furlough’.
- Find out more: nine things you need to know if you’re at risk of redundancy
New VAT deferral scheme
Businesses that deferred their VAT payments due to coronavirus were going to face a lump-sum bill in March 2021.
However, the Chancellor announced that this deferred bill can now be spread over 11 smaller repayments and no interest will be added.
There were reportedly almost 500,000 businesses that deferred more than £30bn of VAT this year.
Pay as you grow for Bounceback loans
Many small businesses were given government-backed loans earlier this year to help with costs and cashflow during lockdown.
These were originally due to be repaid over the next six years – but this has now been increased to 10 years, reducing many businesses’ monthly repayments.
Businesses that are struggling can also make interest-only repayments or apply to suspend repayments altogether for up to six months.
More time for government loans
Other government loan schemes for businesses are having their application deadlines extended to the end of 2020 and the Chancellor hinted at a new ‘successor loan programme’, which is set to launch in January 2021.
- Read the latest coronavirus news and advice from Which?
This article was originally published on 24 September 2020 when the Chancellor announced the Winter Economy Plan. It was last updated on 22 October 2020, to detail the further changes to the Job Support Scheme and Self-Employed Income Support Scheme.