Summer statement 2020 – a quick look at the Chancellor’s key employment-related points

Summer statement 2020 – a quick look at the Chancellor’s key employment-related points

Key contact: Claire Knowles

Author: Rebecca Mahon

Britain has now entered the second phase of the Government’s economic response to the coronavirus crisis. At lunchtime yesterday, the Chancellor Rishi Sunak delivered his summer statement. In his opening remarks, he confirmed he would be announcing a “plan for jobs” to protect, create and support employment, and this included the following major announcements:

Furlough scheme

As already confirmed, the furlough scheme will start “winding down” from next month, with the amount that employers can recover from the scheme gradually reducing from 1st August. The scheme will come to an end on 31 October. The Chancellor has announced that if an employer brings an employee back from furlough and that employee is still employed as at 31 January 2021 then the employer will receive a £1000 “furlough bonus” for that retained employee.

Comment: this proposal looks well-intentioned but we would question if it is a good use of public money. £1000 is unlikely to be a sufficient sum of money to prevent struggling businesses from making redundancies if it is uneconomic for them to continue to employ staff. It also appears that all employers who have made use of the Furlough scheme will be able to access the bonus irrespective of whether they ever intended to make redundancies so it may provide an unjustified windfall for less scrupulous users of the scheme. As with the main job retention scheme it is difficult to see why the government has not adopted a more sector specific approach which recognises that the economic impact of the coronavirus pandemic has not been evenly spread. We await further updates on this.

Kickstart scheme

The Chancellor announced a “kickstart” scheme for employers that create jobs for people between the ages of 16-24. Under the scheme, the Government will pay the wages of new employees between the ages of 16-24 for 6 months.

Comment: certain industries (construction, manufacturing, retail) could really benefit from this scheme. The primary criticism of the proposed scheme, as of this afternoon, is that it may lead to a situation where employers are “playing the system”, hiring employees for 6 months and then dismissing, leading to a high turnover of staff. This is something that we, as an economy, have been trying to move away from under the Good Work Plan reforms and as such, we expect there to be stringent restrictions on how the scheme is used.

Apprenticeship support

Companies that take on apprentices will now get a payment of £2000 per apprentice. If the apprentice is over 25, the “bonus” is reduced to £1500. This bonus is only available for employers that apply for it between August 2020 and January 2021.

Comment: this is also likely to benefit industries such as construction, manufacturing and retail. But the scheme is only available for the next few months. Some industries are not even sure whether they will be fully re-open before the end of the year and so unfortunately, taking on an apprentice is unlikely to be a priority.

In addition to the key employment points flagged above, the Chancellor also announced VAT cuts for the hospitality, reducing VAT from 20% to 5% on food, accommodation and attractions for the next 6 months. There is also a new “Eat Out to Help Out” scheme being launched, which businesses can apply for from Monday (via a dedicated website – yet to go live). During August, participating restaurants will be able to offer 50% off to customers on food ordered on Monday – Wednesday and claim the rest back from the government (up to maximum of £10 per head). It’s not clear whether the discount will be accessible to restaurants offering takeaways.

We are expecting further guidance on these announcements to be made available in the coming weeks and will report on this as and when it becomes available. In the meantime, please do not hesitate to contact our employment team if you have any questions on the Chancellor’s summer statement or if you need any further assistance.

Claire Knowles – Partner

Mark Alaszewski – Associate

Rebecca Mahon – Solicitor

Adam McGlynn – Trainee Solicitor

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