Chancellor Rishi Sunak said it was “impossible” to predict how many jobs the government’s new wage subsidy system will save.
The program, intended to replace holidays, will see the government increase the wages of those unable to work full time.
It aims to end massive job cuts after the government introduced new measures to tackle the increase in coronavirus cases.
Mr Sunak said he hoped the plan would “benefit a great many”, but could not say which job is “viable or not”.
Under the employment support program, if bosses bring back part-time workers, the government will help them supplement their wages with employers to at least three-quarters of their full-time wages.
It will start on November 1 and will last six months.
How will the employment support program work?
As part of this program, the government will subsidize the wages of employees who work less than their normal hours due to declining demand.
Employers will pay for the hours actually worked. And then the government and the employer will cover two thirds of the lost wages together. But only staff members capable of working at least one-third of their regular hours will be eligible for the program.
Payment will be based on an employee’s normal salary, with the government contribution capped at £ 697.92 per month.
Why is the government doing this?
Mr. Sunak described the program as a “radical new policy” designed “to help protect as many jobs as possible. [and] keep people part-time rather than firing them ”.
However, he said it would only support “viable jobs” – as opposed to jobs that exist because the government continues to subsidize wages.
“It’s not for me to sit here and make statements about exactly what work is viable or not, but what we need to do is scale up our support now that we are in the acute phase of the crisis. crisis, “Sunak told reporters. conference after the unveiling of the project.
“We obviously cannot maintain the same level of things that we were doing at the start of this crisis.”
How many jobs will this save?
The BBC understands that the Treasury estimates that between two and five million people could be covered by the new employment support program.
However, the chancellor told a press conference that he would “be lying” if he tried to give precise figures, but he said some unemployment forecasts “do not make a good read”.
Nearly three million workers – or 12% of the UK’s labor force – are currently on partial or full leave, official figures show. The current leave program ends on October 31st.
The government’s contribution to workers’ wages will decrease sharply compared to the leave scheme. On leave he initially paid 80% of a monthly salary up to £ 2,500 – under the new scheme it will drop to 22%.
“The main objective of our economic policy remains unchanged – to support the employment of people – but the way in which we do this has to evolve,” Sunak said.
“I cannot save all the businesses, I cannot save all the jobs.”
How much will it cost?
The program will cost the government around £ 300million per month. Companies that use it can also claim the job retention bonus, where the government pays £ 1,000 for every employee on leave who returns to work at least until the end of January.
Mr Sunak said a similar scheme for the self-employed would be available.
Who does it help?
All small and medium-sized businesses will be eligible for the program, but large businesses will only be eligible if their turnover declined during the crisis
It will run for six months from November and will be open to UK employers, even if they have not yet used the leave scheme.
Employees must be in “viable jobs” to benefit from the program. Those in industries currently closed – like nightclubs – may lose out because there is no work.
What do companies think?
The business lobby group, CBI, hailed the government’s plan.
“It is right to target aid on jobs of the future, but can only be part-time as long as demand remains stable. This is how skills and jobs can be preserved to enable a rapid recovery. “said CBI CEO Dame Carolyn Fairbairn.
However, Torsten Bell, chief executive of the Resolution Foundation think tank, said the new jobs program alone “will not encourage companies to cut hours rather than jobs because the contribution of a third employer means it is much cheaper for companies to hire one full-time person than two part-time people.
He warned that the £ 1,000 job retention bonus companies would receive for retaining workers at the end of January, combined with the new scheme, could create a new ‘cliff’ for job cuts. jobs.
“We now have a great incentive for companies to retain part-time workers until you qualify for the bonus.”
The Labor Party, meanwhile, said it would support any measures to save jobs, but accused the government of acting too late.
What about the workers?
Tracey Sheppard is a cleaner at a recreation center in Essex, on leave since the end of March. She said she hopes the new employment assistance program will help her, but there are no guarantees.
“It’s a very big company that I work for… but I don’t know if they could afford to keep me… I just don’t know,” she told the BBC’s World At One.
She said she felt “scared” because her family had only recently moved to the area and this is the only job she can do in childcare.
“I just heard nothing [from my employer]. The last time I heard from them it was the start of the lockdown. “
What else did the Chancellor announce?
A reduction in VAT for hospitality and tourism businesses will also be extended until March. The reduction in VAT from 20% to 5% – which went into effect on July 15 – was due to expire on January 12 of next year.
However, the Food and Beverage Federation (FDF) said this and the new employment plan “did not go far enough” to help the industry which has been affected by new government restrictions to prevent the rise in coronavirus cases.
What about loan repayments?
Mr. Sunak also announced that companies that borrowed money under the government’s loan program would have more time to repay the money.
The Chancellor said that small businesses that have taken out “Bounce Back” loans can use a new flexible “Pay as You Grow” repayment system. This means that the loans can be repaid over 10 years instead of the original six-year term.
The longer repayment period also applied to small and medium-sized businesses that borrowed under the coronavirus business interruption loan program.
Businesses will also have more time to apply for these loans, as well as the Large Business Coronavirus Business Interruption Loan Program and the Future Fund. Application dates for the various programs were to end in October and November.
Will the program work?
The new employment support scheme is a fraction of what we have seen in recent months and focuses on those who are considered to have “viable” jobs. It cannot prevent a sharp rise in unemployment in the coming months in “unsustainable” jobs.
Indeed, the economic impact of the multibillion-pound package should be more than offset, even by the announcement this week that the UK is facing a six-month ‘new normal’ of social restrictions.
The Treasury has extended the support bridge it put in place in March to cover the next six months.
But the new system requires everyone to participate. This will be too much for many employers. We’re about to find out how many.
Learn more here
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