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Employers to get bonus for keeping on staff

8 July 2020

Chancellor Rishi Sunak has announced a raft of new measures designed to protect, support and create jobs, including a job retention bonus.

The "Plan for jobs" announced by the chancellor in his summer statement is part of the government's plan to secure the UK's economic recovery from coronavirus.

For businesses, the key measures are:

  • A £1,000 bonus for businesses for each employee that they bring back from furlough;
  • A Kickstart Scheme to create jobs for 16 to 24-year-olds;
  • New payments for businesses that hire apprentices;
  • A temporary cut in VAT (from 20% to 5%) for the hospitality and tourism sector;
  • A rise in the threshold of stamp duty from £125,000 to £500,000.

The headline measure announced by Rishi Sunak is a one-off job retention bonus of £1,000 that will be paid to businesses for every employee that they continue to employ for three months after the furlough scheme ends in October.

Acknowledging that the hospitality and tourism industry has been badly damaged by the pandemic, Rishi Sunak announced a temporary VAT cut for this sector - taking the rate down from 20% to 5%. This will apply from 15 July 2020 until 12 January 2021.

In addition, a new "Eat Out to Help Out" discount scheme is aimed at boosting the hospitality sector in the short term, providing a 50% reduction for sit-down meals in cafes, restaurants and pubs across the UK from Monday to Wednesday every week throughout August 2020.

Job creation is a key part of the government's plan. The £2 billion Kickstart Scheme promises to create "hundreds of thousands of new, fully subsidised jobs" for young people aged 16-24. Funding for each six-month job placement will cover 100% of the national minimum wage for 25 hours a week - and employers will be able to top up this wage.

In addition, £1.6 billion will be invested in scaling up employment support schemes, training and apprenticeships. Businesses will be given £2,000 for each new apprentice they hire under the age of 25. This is 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.

The chancellor's job creation measures also include a £3 billion green investment package and he moved to support the housing market by introducing a temporary increase to the Nil Rate Band of residential stamp duty from £125,000 to £500,000 until 31 March 2021.

Commenting on the summer statement, TUC general secretary Frances O'Grady warned that "struggling businesses will need more than a one-off job retention bonus to survive and save jobs in the long-term … Mass unemployment is now the biggest threat facing the UK … the government must do far more to stem the rising tide of redundancies."

Jane Gratton, head of people policy at the British Chambers of Commerce (BCC), said: "We look forward to seeing the detail of the job retention bonus to help safeguard jobs for some furloughed staff, but the best way to protect jobs is to reduce the overall cost of employment. Ministers must consider a cut in employer national insurance contributions in the coming months."

Jonathan Geldart, director general of the Institute of Directors (IoD), described the Job Retention Scheme bonus as "something of an off-ramp from the furlough scheme" but said that for many cash-strapped businesses, that January bonus would "feel like a long way off".

Geldart added: "The chancellor's greatest strength has been his willingness to adapt as the situation moves. While there were certainly things for businesses to welcome today, there is still a long hard road back to full economic health."

Image: Downing Street on Flickr.

Written by Rachel Miller.

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