After what seemed like a long build up, Chancellor Rishi Sunak has now set out his plans to help the economy bounce back from the effects of the Covid-19 pandemic. With more than 700,000 people losing their jobs, the Chancellor has announced further measures which aim to support businesses and jobs. Whilst the measures announced will provide relief to businesses, it is estimated that the unemployment rate is set to increase and peak at 6.5% next year which means there are still some who will feel the Chancellor has not gone far enough to protect everybody. Key details of the announcement from an employment perspective along with our comments are listed below.
Furlough Support Scheme to be extended until September
Currently, four million people are using the coronavirus job retention scheme. This is the highest level since Summer 2020. Whilst we initially anticipated the furlough scheme to end in April 2021, the Chancellor has announced a further extension of the scheme to the end of September 2021.
The scheme will continue to run as anticipated until June and furloughed employees will continue to receive 80% of current salary, capped at £2,500 a month. From July, the Government will contribute 70% of unworked hours and employers will contribute 10%. In August and September, the employer’s contributions will increase – the Government will contribute 60% and employers 20%.
Whilst some will be disappointed by the employer contributions during the latter part of the scheme, in general this will be a very welcome boost to employers who remain affected by the pandemic, and notably it applies beyond the expected date for restrictions to end, providing support while employers attempt to make a return to normal.
Self-Employment Income Support Scheme (SEISS)
The Chancellor has confirmed that the SEISS will be extended to include a fourth and fifth grant. Under previous eligibility criteria, many self-employed people were excluded, however those people will welcome the further announcement today which widens the eligibility criteria.
The fourth grant will be opened to cover the loss of trading profits between February and April 2021. The fifth grant will cover the period between May and July 2021. These grants will cover 80% of average trading profits, up to £7,500.
The widening of eligibility criteria will now ensure 600,000 more self-employed people will be protected under these two additional grants, provided they have filed a tax return by midnight last night.
Tax Allowances
It was confirmed that there will be no changes to the rates of income tax, national insurance or VAT.
The personal tax allowance will be increased next year but will then be frozen at £12,570 from 2022 to 2026. Higher rate income tax threshold will be frozen at £50,270 from 2022 to 2026.
The hospitality and tourism industry will be pleased that the VAT rate for their sector is to be maintained at the reduced 5% rate until 30 September 2021. It has been confirmed that it will not return to the full standard rate of 20% until April next year, with a 12.5% rate applying instead. This will provide relief to those businesses who have been significantly affected during the pandemic.
Apprenticeships and Traineeships
Incentive payments are already in place for employers who hire a new apprentice between 1 August 2020 and 31 March 2021. The Chancellor has confirmed this is to be extended and grants for apprentices will rise to £3,000. Incentive grants for Traineeships will also rise to £126m. This scheme continues to incentivise employers to grow and boost employment.
Minimum Wage
It has been announced that from April 2021 the minimum wage will increase to £8.91 an hour.
Conclusion
Overall, this budget is likely to be welcomed by most employers, although some will feel that it has not gone far enough. In particular, the furlough scheme is likely to be of great assistance now that there is a roadmap out of lockdown. With these announced schemes today, perhaps business can see a clearer road to recovery.
For further information, or to discuss the issues raised by this update, please contact our Employment Group on 0118 977 4045 or employment@herrington-carmichael.com.
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.
