COVID-19: Sunak goes further in providing more support for jobs and firms
Rishi Sunak has unveiled additional government support measures under his Winter Economic Plan as more areas of the country see further lockdown restrictions imposed.
This latest COVID-19 support package for stricken businesses addresses a number of the concerns raised by business owners by reducing employer contributions to the Job Support Scheme (JSS) in a move designed to make it more worthwhile financially for employers to retain staff.
In addition, business grants are expanded to cover those businesses in badly affected sectors like hospitality in high-alert level areas to help them stay afloat and protect jobs.
There is also much needed respite for the self-employed with a doubling of grants to 40% of previous earnings in response to recent criticism.
Click here for details of the latest changes.
The main thrust of the changes involve a remodelling of the JSS which slashes employer contributions from 33% to just 5% (down from 55% previously) which means that the government pays at least 62% for hours not worked and employees take home at least 73% of normal pay for working 20% of hours.
The Treasury has provided a worked example of how the revised Job Support Scheme could work:
- A typical full-time employee in the hospitality industry is paid an average of £1,100 per month
- Under the Jobs Support Scheme for open businesses, they will still take home at least £807 a month
- All the employer needs to pay is a total of £283 a month or just £70 a week; the government will pay the rest.
Commentating on the latest overhaul to the JSS, Phil Mills, Head of Food & Drink at Old Mill said ‘Whilst we welcome any improvement this is the third statement from Mr Sunak in less than a month which suggests perhaps that the government is playing catch up to what is still a pretty dire situation for most, if not all, hospitality businesses.
‘With the tightening of lockdown restrictions there is a lot of confusion which has decimated trade for pubs and restaurants to the extent that many are not currently viable so it remains to be seen whether it’s enough to keep people in jobs.
‘That said, the direction of travel means that although things will remain tough for many food & drink businesses, these new measures should make it more worthwhile financially for employers to retain staff which will be critical for keeping unemployment down in the sector over the coming months.
‘With the uncertainty set to continue, there needs to be a longer term strategic plan to secure the future of the industry that may require radical changes to the VAT and the tax system applicable in the sector.’
In recognition that the impact of restrictions is creating a fall in demand for many businesses in hard hit sectors that are not being legally forced to close, the Chancellor is making a retrospective grant scheme available through Local Authorities which will be backdated to August.
The funding Local Authorities will receive will be based on the number of hospitality, hotel, B&B, and leisure businesses in their area.
The amount of funding that will be the equivalent of:
- For properties with a rateable value of £15,000 or under, grants of £934 per month
- For properties with a rateable value of between £15,000-£51,000, grants of £1,400 per month
- For properties with a rateable value of £51,000, grants of £2,100 per month.
NB This is equivalent to 70% of the grant amounts given to legally closed businesses (worth up to £3,000 per month).
In a further move to stave off further hardship for the self-employed the Chancellor announced that he is to beef up the Self-Employed Income Support Scheme (SEISS) by increasing the amount of profits covered by the two forthcoming self-employed grants from 20% to 40%, meaning the maximum grant will increase from £1,875 to £3,750.
Grants are available for all self-employed people who’ve stopped trading or have a significant fall in trade.
Grants will be paid in two lump sum instalments each covering three months. The first grant will cover a three-month period from the start of November 2020 until the end of January 2021. The government will pay a taxable grant which is calculated based on 40% of three months’ average trading profits, paid out in a single instalment and capped at £3,750.
The second grant will cover a three-month period from the start of February until the end of April 2021. The government will review the level of the second grant and set this in due course.
Chris Bowles, a Director at Old Mill’s Wells office who works closely with many owner managed businesses commented ‘Whilst the government could have gone further, this latest intervention is welcome in that it secures a lifeline for many self-employed business owners who have been left to fend for themselves to a large extent and were becoming increasingly nervous about the impact of another enforced lockdown.
Hopefully this measure, when combined with careful planning and the financial support measures previously announced, will buy businesses the time needed to see them through the difficult months ahead’.
For further information please contact your usual Old Mill adviser or alternatively click here…