Employment measures announced in the July 2020 Summer Economic Update

30 Jul 2020

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On 8 July 2020, the Chancellor of the Exchequer, Rishi Sunak, delivered a Summer Economic Update with measures to support the UK’s economic recovery from Coronavirus. A key element of these measures were those designed to incentivise employers to retain and create jobs.

Job Retention Scheme

The Chancellor confirmed that the scheme will not be extended beyond the current 31 October deadline. There are though staggered changes to the rules over the final months of the scheme that are briefly summarised below:

  • July: new cap on claims based on maximum claimed in previous periods.
  • August: no further claims in respect of National Insurance and pension costs.
  • September: the 80% due will be split between 70% HMRC claim/10% funded by employer.
  • October: further change in split to 60% HMRC/20% employer.
  • November: no claims possible.

Job Retention Bonus

The government has introduced a new grant to employers to encourage them to retain staff on returning to work after a period of furlough.

There will be a one-off payment of £1,000 to employers for every furloughed employee who remains continuously employed through to the end of January 2021. Employees must earn above the Lower Earnings Limit (£520 per month) on average between the end of the Coronavirus Job Retention Scheme and the end of January 2021. Payments will be made from February 2021, presumably through the PAYE online system.

Further details about the scheme are due to be announced at the end of July, which will hopefully cover the position on issues such as employees on sick leave, or overseas employers. There is some initial concern that employees could hold employers to ransom in December/January as to leaving immediately before the end of January and so the employer losing the £1,000.

Kickstart Scheme

The government will introduce a new Kickstart Scheme; a £2 billion fund to create six-month work placements for the 16-24 age group who are on Universal Credit and are deemed to be at risk of long-term unemployment. The funding available for each job will cover 100% of the relevant National Minimum Wage rate for 25 hours a week, plus the associated employer National Insurance contributions (NICs) and employer minimum automatic enrolment pension contributions.

Furthermore, new payments for employers who hire new apprentices were also announced. This will enable a new payment of £2,000 to employers for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over, from 1 August 2020 to 31 January 2021.

More details on these initiatives will be made available shortly.

These payments will be in addition to the existing £1,000 payment the government already provides for new 16-18-year-old apprentices, and those aged under 25 with an Education, Health and Care Plan – where that applies.

There is also an existing employer NIC relief available for those employed as apprentices and under the age of 25 that is in addition to the new payments announced above.

For advice on these changes, please speak to your usual Saffery Champness partner.