Coronavirus update – Chancellor announces innovative "kickstart" to the post-Covid economy

The UK Government has not shied away from significant public expenditure during the coronavirus pandemic, most notably the Coronavirus Job Retention Scheme (CJRS) which has seen the taxpayer fund 80% of the salary of furloughed employees.

The CJRS is being gradually wound-down until it ends on 31 October 2020 (see our Covid-19 employment FAQs and article on updates to the CJRS), and there has been widespread concern that mass unemployment might follow as employers grapple with severe ongoing weak demand.

The Chancellor, Rishi Sunak, has today announced a series of measures to try to reduce the likelihood of a large rise in the number of people being out of work. The most significant for employers are as follows.

  • Job Retention Bonus: In an effort to incentivise employers to keep on furloughed workers, the government will pay employers a bonus for each employee that is retained.
    • The bonus is worth £1,000 per employee.
    • It is only payable if the employee remains employed until at least January 2021.
    • The employee must earn on average a minimum of £520 per month between the end of the CJRS and the end of January 2021.
    • Payments will be made from February 2021.
    • Further detail will be announced by the end of July.
  • Kickstart Scheme: This scheme is designed to boost the employment opportunities of young people – "kickstarters" in the Chancellor’s jargon - to avoid them becoming what the Chancellor described as a "blighted generation". The Government will pay 100% of the relevant national minimum wage for those employed under the scheme, which the government (perhaps optimistically) hopes will create 350,000 new jobs.
    • The scheme is open to all 16-24 year olds on Universal Credit.
    • Government national minimum wage contribution for the first six months of employment plus the associated employer National Insurance contributions and employer minimum automatic enrolment contributions.
    • The job must be a new one, and must be for at least 25 hours per week.
    • The salary must be at NMW or above.
    • Participating employers will also receive £1,000 for administrative costs.
  • Apprentices and trainees: Employers will receive £2,000 to take on young apprentices (£1,500 for apprentices aged 25 and over). In addition, employers will receive £1,000 to take on new trainees.

Political reaction to the package has been mixed, as might be expected. Employers will need to weigh the financial incentives available under each strand of the Government’s proposals against their short- and medium-term demand projections. Redundancy exercises are, regrettably, likely to remain a necessary corrective for many businesses in the coming months.

To discuss your organisation’s specific situation, please feel free to get in touch with us, or speak to your usual Macfarlanes contact.