Summer Economic Update - Employment Taxes

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Stephanie Wilson - Partner and Head of Employment Taxes
Steph helps employers achieve cost savings by implementing more effective pay and benefits as well as effectively managing their employment tax and compliance risks. Steph enjoys providing real commercial insights into the everyday issues, stresses and synergies between finance, tax and HR professionals.  

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The Chancellor set out the government’s plans to support, protect and create jobs with a Plan for Jobs including a Job Retention Bonus and one off payments for new apprenticeship roles. Specific measures are set out below:

Government announces Job Retention Bonus

Update: On 31 October, the Government announced a second national lockdown and an extension to the CJRS for November 2020. It is expected that the dates for the Job Retention Bonus scheme described below will, therefore, change. 

The Government announced that the Coronavirus Job Retention Scheme (CJRS) would not be extended beyond 31 October 2020. Up to 9 million employees have been furloughed to date.

Instead of extending the CJRS, employers will be paid a bonus of £1,000 for every employee who has been furloughed at some point but who returns to work and remains continuously employed to the end of January 2021. Employers can apply for the bonus from 15 February 2021 regardless of whether or not they have also claimed under the new Jobs Support Scheme

For example, if an employer has claimed under the CJRS since April 2020 for a number of its staff, it can claim for all who meet the criteria at 31 January 2021 even if some of them returned from furlough in July and have worked full time since then. However, bonus claims cannot be made where no valid CJRS claim was made for an employee (including where an employer voluntarily returned funds from a valid CJRS claim). 

To qualify for the bonus, an employer must pay relevant employees at least £1,560 in taxable pay from period November to January, with some payment each month that is at least the National Minimum Wage/National Living Wage for the hours worked 

Although some guidance has been published, it is still not clear whether the employee must be engaged on the same terms and/or working hours as before they were furloughed. However, the employees for which an employer claims the bonus must not be on either statutory or contractual notice of redundancy at any point up to 1 February 2021. 

The payments will be considered taxable income for the employer in the same way as CJRS grants are.

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The Government has announced a new traineeship scheme for 30,000 16 to 24 year olds in England.

The scheme, which will cost £111 million, will see firms provided with a £1,000 cash bonus for every new work experience place they offer. Devolved Governments in Scotland, Wales and Northern Ireland will be provided with £21 million for similar schemes.

The traineeship scheme will begin in England from September 2020, with the Treasury indicating that employers must offer “a high-quality work placement of 60 to 90 hours” in order to qualify.

Traineeships provide classroom-based lessons in Maths, English and CV writing, as well as up to 90 hours of unpaid work experience. Traineeships can last from six weeks up to six months. Employers are not required to pay trainees for a work placement, unlike apprenticeships where the minimum wage rate is £4.15 per hour.

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Government announces ‘kickstart jobs scheme’ for young people

As part of the Summer Economic Statement, the Government has announced a £2 billion ‘kickstart jobs scheme’ to create more jobs for individuals aged between 16 and 24. This scheme will specifically subsidise six month work placements for 16 to 24 year olds on Universal Credit who are at risk of long-term unemployment.

For each ‘kickstarter’ job, the Government will cover the cost of 25 hours' work a week at the National Minimum Wage (NMW) - £4.55 for under 18s, £6.45 for 18 to 20-year-olds, and £8.20 for 21 to 24-year-olds. Employers will be able to make payments to exceed these NMW limits if they wish.

The scheme will operate from August 2020 until December 2021 (with the option of being extended) and cover England, Scotland and Wales: and additional funding will be provided for a similar scheme in Northern Ireland.  

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Apprenticeships – new financial support

The Government has announced the introduction of new payments from 1 August 2020 to employers in England who engage new apprentices before 31 January 2021. This will be at two levels; £2,000 for each new apprentice aged under 25, and a £1,500 for the over 25s. Employers in England have already been receiving payments of £1,000 for new 16-18 year-old apprentices, and those aged under 25 with an Education, Health and Care Plan – where that applies. 

It would appear that this is an extension of the existing measure for under 18s and, if it follows the existing practices, will be paid via the training provider that employers (who pay the Apprenticeship levy) engage. Smaller employers (with fewer than 50 employees) who are not liable for the Apprenticeship levy, currently access existing payments via their apprenticeship service account. There are no details as yet on how the new payments will be accessed but it is likely they will be via the same routes.

This may provide a financial incentive to encourage employers to recruit new apprentices, and along with the existing exemption for employer’s NIC for the apprentices under 25, will no doubt be welcome by employers. The payments do not extend to the other nations in the UK.

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Jobseeker support

The Government has announced a number of new programmes targeted at helping individuals into work. While these programmes are focussed on individuals and job support services rather than employers, the intention is that employers will benefit from the programmes in terms of greater numbers of skilled applicants and potentially leading to an increase in headcount. These programmes cover both training to upskill job seekers as well as assisting the unemployed back into work.

For school leavers aged 18 and 19 from the 2020-21 academic year without available employment opportunities, £111 million will be provided to facilitate high value Level 2 and 3 training courses.

In England only, training will also be made available in the form of an additional £17 million to fund sector-based work academies.

For those looking for work, the Government announced new/additional support in Great Britain (England, Wales and Scotland) in the form of:

  • Greater support from Department of Work and Pensions for young jobseekers (aged 18 to 24) currently claiming Universal Credit under the Intensive Work Search group
  • £895 million to double the number of work coaches in Jobcentre Plus (this funding will be made available by the end of the financial year)
  • £95 million to expand the current Work and Health Programme which will include additional voluntary support for those on benefits and unemployed for at least three months (expansion starts in the autumn)
  • £40 million on a new online job finding support service to assist those unemployed for fewer than three months to increase their chances of finding employment
  • £150 million to expand the Flexible Support Fund to help employees made redundant find new employment, including funding for travel expenses to attend interviews.

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