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COVID-19/Coronavirus: Government support for workers

COVID-19/Coronavirus: Government support for workers

23 March 2020

Last Friday (20 March) saw the latest unprecedented announcement of Government support - this time for employees - in response to the COVID-19/Coronavirus outbreak.

While the Chancellor had already announced another unprecedented package of support for businesses (see R3's summary of these measures here), pressure had been building on the Government to set out a similar set of policies for those workers affected by the economic impact of the virus.

The headline measure, a new Coronavirus Job Retention Scheme, will see the Government paying up to 80% of a worker's wages, up to a total of £2,500 per worker each month. Employers will be able to contact HMRC for a grant to cover most of the wages of their workforce who remain on payroll but are temporarily not working due to the virus outbreak. Any employer in the country - small or large, charitable or non-profit - will be eligible for the scheme.

The Chancellor also set out that, in an effort to ease cash flow pressures for VAT-registered businesses, VAT bills until the end of June will be deferred until the end of the tax year.

The welfare system will also see additional Government support, with Universal Credit and Tax Credits also being increased as part of an almost £7 billion package.

Announcement details

  • UK workers of any employer placed on the Coronavirus Job Retention Scheme can keep their job, with the Government paying up to 80% of a worker's wages, up to a total of £2,500 per worker each month. These will be backdated to 1 March 2020 and will be initially open for three months, to be extended if necessary. HMRC is currently setting up the scheme and it is expected that the first grants will be paid within weeks.
  • VAT payments due between now and the end of June will be deferred. No VAT-registered business will have to make a VAT payment normally due with their VAT return to HMRC in that period. Income tax payments due in July 2020 under the Self Assessment system will be deferred to January 2021.
  • Additionally, the Coronavirus Business Interruption Loan Scheme, launched at the Budget, will now be interest free for twelve months.
  • The standard rate in Universal Credit and Tax Credits will be increased by £20 a week for one year from 6 April, amounting to an increase of £1,040.
  • Nearly £1bn of additional support for renters has been unveiled, through increases in housing benefit and Universal Credit. From April, Local Housing Allowance rates will pay for at least 30% of market rents in each area.

Further details can be found on the Government's guidance page for businesses.

R3's response - and questions to be answered

The latest measures announced by the Chancellor are a positive step and will go some way in providing businesses with the financial help they need to support and retain their staff and weather the economic storm.

Once the crisis phase of this is over, businesses will need to rebuild, and their staff will play a crucial part in this. This package of support for workers will hopefully enable businesses to hold on to the talent that will drive their recovery, as well as providing a financial lifeline for many employees facing a period of great uncertainty and turmoil.

However, time will tell whether this package is enough. Detail on how these measures will affect those who are self-employed or on zero hours contracts is needed as these groups are particularly financially vulnerable in the current climate. Already, speculation is mounting that the Chancellor is considering a further set of measures to support those who are self-employed, possibly on a similar basis to the package set out by the Norwegian Government, which is paying self-employed workers grants equating to 80 per cent of their average income over the past three years.

We have also said that, as well as support for maintaining employment, other help is needed. The VAT payment holiday is welcome, but the same could be done for other taxes.

Despite the support the Government providing, we are aware that this is a worrying time. Any directors or business owners whose businesses are in difficulty or are starting see signs it will struggle should seek professional advice as early as possible. Early advice and early discussions with creditors give a business more options to find and implement solutions to the challenges they face and begin to address issues like rearranging payment terms.

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James Jeffreys
James Jeffreys
020 7566 4220
James JeffreysJames Jeffreys
Head of Press, Policy and Public Affairs
020 7566 4220
Stuart McBrideStuart McBride
Communications Manager
020 7566 4214
Giorgio ButtironiGiorgio Buttironi
Public Affairs Manager
020 7566 4227

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