Summer Statement – supporting and creating jobs

The Chancellor’s Statement was never intended to be a mini-Budget or a fully-costed fiscal plan. The economy is still reeling from the impact of the coronavirus pandemic and as it is trying to get back on its feet it is a time to build confidence not balance the books. Of course, businesses need to wean themselves off of the “furlough scheme” before it ceases in October. However, it is acknowledged that without further support the outlook for employment rates is bleak given that the scheme has supported the wages of 9m employees. The Statement, therefore, was focussed on restoring confidence, supporting existing jobs and creating new jobs, especially for the younger generation who are considered to have been disproportionately impacted. Three key measures were announced to support employment:

1. A Jobs Retention Bonus
2. The Kickstart Scheme
3. Apprenticeship support

Jobs Retention Bonus

Under the Jobs Retention Bonus (“JRB”), UK employers will be entitled to a one-off bonus of £1000 where furloughed employees are continuously employed until the end of January 2021. Whilst further detail about the scheme will be announced before the end of July, we know that in order to be eligible employees must earn at least £520 per month on average from the end of the “furlough scheme” (i.e. 1 November 2020) to the 31 January 2021. There will be many questions about how the JRB will apply.  For example:

• What is meant by “continuously employed”?
• Will the JRB apply to part-time workers?
• Will there be a minimum hours requirement?
• Will it apply where an employee has gone on parental leave?

As always, the devil will be in the detail.

Chay Took comments: “This is certainly welcome news but the challenge is to ensure the funding makes a difference to the decisions being made. Being a flat rate bonus, it may have more of a policy impact for those businesses with lower-paid staff”.

The Kickstart Scheme

The Kickstart Scheme will cover the cost of providing 6-month work placements for those aged between 16-24 who are on Universal Credit and hence deemed to be at risk of long-term unemployment. Funding will be available for each job to cover:

• 100% of the National Minimum Wage for 25 hours per week
• Employer National Insurance contributions; and
• Employer minimum automatic enrolment contributions

With a £2bn fund put aside for the Kickstart Scheme this could provide for over 350,000 placements.

Apprenticeship Support

The government has for some time recognised the potential benefits of apprenticeships and traineeships. Further support will be provided in two ways:

• A £1,000 payment to employers in England who provide trainees with work experience; and
• A £2,000 payment to employers in England for each new apprentice they hire aged under 25 and £1,500 for each new apprentice they hire aged 25 and over. This will apply to hires made from 1 August 2020 to 31 January 2021.

Whilst businesses will of course welcome these payments, only time will tell if this support package will be sufficient to incentivise those businesses who have not historically provided traineeship and apprenticeship opportunities.

Many of these measures are obviously helpful in the short-term; however, businesses need to also focus on more strategic matters. COVID-19 has forced businesses to fundamentally re-evaluate their strategies, forecasts and staffing requirements for the longer term. These measures may give an additional breathing space, but businesses also need to consider their longer term oxygen needs.