(Published 9 October and updated on 12 October)
The Chancellor has announced a new local furlough scheme from 1 November 2020 that will allow employees in businesses forced to close due to Covid restrictions to be paid two thirds of their wages.
This is an expansion of the new Job Support Scheme which starts on that date and appears aimed at the hospitality sector..
The local furlough scheme applies where an employer is required to close due to a lockdown, and the government will contribute 67% of normal wages (subject to a cap).
This is different from the normal Job Support Scheme under which employees work a minimum of 33% of their normal hours, and the government pays towards the shortfall in their wages.
There has been disquiet raised over the 67% being less than the 80% payable under the national furlough scheme. This lower amount will be challenging for those on the National Minimum Wage.
The local furlough scheme's official title appears to be: "Job Support Scheme Expansion for Closed Business Premises".
So if a business has to close due to Covid restrictions and people cannot work at all for one week or more, the employer can pay each worker two thirds (or 67%) of their normal salary, up to £2,100 a month – and the government will cover the cost.
However, the government will NOT pay the appropriate Employer NICs and pension contributions. These remain payable by the employer.
The scheme applies to all business premises legally required to close, including including those told to operate on a collection only or delivery basis.
The scheme starts on 1 November and will pay grants from early December.
As regards the government's Covid alert levels announced on 12 October 2020 (Medium, High and Very High), it would appear that a business would have to be in a Very High alert area to qualify for the local furlough scheme.
But a business that is within a High alert area that is not closed down could nevertheless experience a fall in demand due to Covid restrictions - without access to the local furlough scheme reserved for businesses in the Very High alert area, possibly in the next postcode. This could be relevant to a local supplier in a High alert tier to a business in a Very High alert tier.
However, the normal, but less generous, Job Support Scheme would appear to be available to High alert tier businesses, as the scheme applies to open or closed firms.
Under the local furlough scheme, employers are not required to pay wages, only the associated NICs and pension contributions.
Businesses will only be eligible to claim the grant while they are subject to Tier 3 (Very High) restrictions, and employees must be off work for a minimum of seven consecutive days.
The scheme will begin on 1 November and will be available for six months, with a review point in January 2021.
In line with the rest of the new Job Support Scheme, payments to businesses will be made in arrears, via a HMRC claims service that will be available from early December.
Employees of firms that have been legally closed in the period before 1 November are eligible for the national furlough scheme (Coronavirus Job Retention Scheme) currently operating until 31 October.
The local furlough scheme covers any area of the UK that is in lockdown, and the UK government will work with the devolved administrations to ensure the scheme operates effectively across all four nations.
Further details will be set out in Treasury guidance in due course.
What does the local furlough grant cover?
How to claim
(Updated on 12 October 2020)
In addition to local furlough scheme, the government is increasing the cash grants to businesses in England shut in local lockdowns to support with fixed costs.
These grants will be linked to rateable values, with up to £3,000 per month payable every two weeks, compared to the up to £1,500 every three weeks which was available previously.
This could benefit many businesses, including restaurants, pubs, nightclubs, bowling alleys and many more.
These measures will sit alongside the Job Support Scheme and the £1,000 Job Retention Bonus which encourages employers to keep staff on payroll.
The government is also extending the grants scheme to include businesses which have been forced to close on a national rather than a local basis.
With more Covid restrictions on the way, there has been frustration amongst businesses that no announcements were made in the recent Winter Economy Plan, which ruled out an extension to the national furlough scheme.
The current national furlough scheme ends on 31 October 2020, to be replaced by the less generous Job Support Scheme, which allows employees who work at least a third of their hours to have their salaries partly paid by the government.
There will be questions with the local furlough scheme over eligibility. What about firms that have remained closed since the March lockdown? Where do they stand?
Presumably there will be some kind of postcode system for this local scheme, which in itself could create problems where two businesses are within a short walk of each other and one qualifies and one doesn't.
The new scheme does not appear to be helpful to employees in sectors which are not closed down, but nevertheless face reduced demand because of Covid restrictions.
Three tier alert regulations
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