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Pension and National Insurance contributions received support from the government under the furlough scheme in the initial months it was launched. This likely saved employers money and eased their costs as August rolled along and the government eventually stopped covering these elements.
However, employers may struggle with pension costs in the coming months as the new Job Support Scheme is introduced.
This scheme, according to the government, is designed to protect viable jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce.
Under the scheme, the company will continue to pay its employees for the time worked, but the burden of hours not worked will be split between the employer and the government through wage support and the employee through wage reduction.
Overall, the scheme should ensure employees keep their jobs but unlike the furlough scheme, there will be no government support at all for pension contributions.
As the latest factsheet from the government details: “Grant payments will be made in arrears, reimbursing the employer for the government’s contribution.
“The grant will not cover Class 1 employer NICs or pension contributions, although these contributions will remain payable by the employer.”
Many feared as the furlough scheme came to a close businesses would be forced to make staff redundant as costs mounted.
Given that the added costs of pension contributions are set to come into play, it may come to pass that businesses will have to make tough decisions in the months ahead.
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The new Job Support Scheme will be introduced from November 1 and it will run for six months.
The scheme will be available for all businesses across the UK even if they had not utilised the furlough scheme,
It will coincide with the Jobs Retention Bonus plans and according to the government, could be work over 60 percent of average wages of workers who have been furloughed and are kept on until February 2021.
To further support businesses (and therefore, their staff) Rishi Sunak also introduced various tax cuts to ease financial stress.
The proposals set forth by the Chancellor of the Exchequer was welcomed by a number of industry organisations.
This included Dame Carolyn Fairbairn, the Director-General of the Confederation of British Industry, who had the following to say on the new plans: “These bold steps from the Treasury will save hundreds of thousands of viable jobs this winter. It is right to target help on jobs with a future, but can only be part-time while demand remains flat. This is how skills and jobs can be preserved to enable a fast recovery.
“Wage support, tax deferrals and help for the self-employed will reduce the scarring effect of unnecessary job losses as the UK tackles the virus. Employers will apply the same spirit of creativity, seizing every opportunity to retrain and upskill their workers.
“The Chancellor has listened to evidence from business and acted decisively. It is this spirit of agility and collaboration that will help make 2021 a year of growth and renewal.”
While many were relieved by Mr Sunaks recent announcement, the chancellor hinted the latest support may be among the last offered by the government.
As he concluded in his Winter Economy Plan speech: “I said in the summer that we must endure and live with the uncertainty of the moment.
“This means learning our new limits as we go. Because the truth is the responsibility for defeating Coronavirus cannot be held by government alone.
“It is a collective responsibility, shared by all. Because the cost is paid by all. We have so often spoken about this virus in terms of lives lost.
“But the price our country is paying is wider than that.
“The government has done much to mitigate the effects of the awful trade-offs between health, education and employment.
“And as we think about the next few weeks and months, we need to bear all of those costs in mind.”
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