New measures come into force on November 1

The government has announced its replacement for the furlough scheme to support struggling firms over the next six months of covid-19 restrictions.

Under the Jobs Support Scheme, unveiled by chancellor Rishi Sunak in the House of Commons this lunchtime, the government will contribute to the salaries of staff who are working at least a third of their normal hours.

Sunak 0924

Rishi Sunak

Employers will still need to pay the wages of staff for the hours that they work but the government and the employer will jointly increase employees’ salaries to two-thirds of their usual wages.

It means employees who can go back to work but on shorter hours will still be paid two-thirds of the hours that they cannot work. So an employee working 33% of their hours will earn at least 77% of their usual pay, with 55% being paid by their employer and 22% paid by the government.

The scheme will run for six months from November 1 following the end of the Coronavirus Jobs Retention Scheme – otherwise known as the furlough scheme – on October 31. It will be capped at £697.92 a month per employee.

It will be open to businesses across the UK, including those which have not previously used the furlough scheme. Small and medium-size firms are automatically eligible but large practices can only apply if their turnover has dropped.

Sunak said: “It is now clear, as the prime minister and our scientific advisors have said, for at least the next six months the virus and restrictions are going to be a fact of our lives.”

He added that while the government’s primary goal of protecting jobs had not changed: “The underlying rationale must be different to what came before.”

Firms which use the Jobs Support Scheme will still be eligible for the Jobs Retention Bonus, under which the government will give employers a one-off payment of £1,000 for every employee they bring back to work from the furlough scheme and continuously employ until January 31 next year.

The equivalent furlough scheme for the self-employed, known as the Self Employment Income Support Scheme grant (SEISS) will be extended on “similar terms and conditions” to the new Jobs Support Scheme.

Self-employed workers will also be eligible for a taxable grant covering three months of profits from November to the end of January next year up to a total of £1,875 per month.

A second grant for self-employed workers will be available from February 2021 to the end of April, which the Treasury said may be adjusted to respond to changing circumstances.

The chancellor also announced an additional scheme known as Pay As You Grow, which will extend the repayment period for firms which took out a Bounce Back Loan from six to 10 years, nearly halving the average monthly payments. And firms who are “really struggling” can apply to suspend repayments for up to six months.

In addition, businesses that deferred paying their VAT bills will be given more breathing space through the New Payment Scheme which allows them to pay in 11 interest-free instalments during the 2021-22 financial year, rather than paying a lump sum at the end March.