The 101 on the Wage Subsidy Programme that has Replaced Furlough


Wage Subsidy Programme

October 30, 2020

Furlough after its four-month extension is finally ending in October 2020 leaving both employers as well as employees in a dilemma. So, now what are employers to do with businesses facing an all-time low and the economy at best, only shakily getting to its feet? Well, the answer to this appears to be the new wage subsidy scheme unveiled by Rishi Sunak the chancellor. This new scheme also is more of a job’s protection scheme where wages of workers will be topped up a bit like the Coronavirus Job Retention Scheme, but that is where the similarity ends.

  • What is it?

Employees will now receive at least 77% of their usual pay (barring cases where the pay is above the capped amount) but for this need to have worked for a minimum of a third of the normal hours. For each hour that the employee does not work the employer as well as the government will pay one third towards the usual pay. For employers, the bad news is that National Insurance Contributions and Work Place Pension contributions are no longer covered under the grant. Thus, though the employer will have to pay these they cannot be claimed back.

  • Who can apply?

To apply for the wage subsidy scheme, it is not mandatory that the employer previously has been on the furlough scheme or kept employees on the scheme. All employers are eligible if they have a PAYE scheme and a bank account. Thus, having been a part of the furlough scheme is not a requirement. However, not all large firms would be able to apply as the government has prepared this scheme keeping in mind SMEs.

  • What is the duration?

Now that furlough ended the new scheme is set to commence from 1st November 2020 for a minimum of 6 months, hence, till April 2021. Thus, 6 months at present appears to be the tentative duration. One must also understand that with this scheme the government is also asserting that the economy is recovering and that this scheme is there to provide a buffer so that the economy isn’t knocked off its shaky legs post the first wave of Covid 19.

Some feel that this scheme will help see businesses through the second wave of the pandemic. This is foreseen by the government as an adjustment to a world that is striving to work and run alongside the pandemic.

  • How much do you get?

Based upon the working of the employee’s usual hours, for each hour that the employee does not work the employer as well as the government would need to pay about 1/3rd of the usual pay of that employee. The government’s cap amount here is much lower than furlough since it is set at £697.92 monthly. Furlough had started at £2500 as the cap limit originally.

  • Further extensions to business support

This year is getting extremely muddled on the business front with all the dynamic changes that businesses have to go through. It is hardly a wonder then that most firms have decided to outsource their accountancy related work during these trying times as keeping up to date is becoming increasingly difficult. To reduce the pressure businesses are facing a “pay as you grow” centred programme has been added to the Bounce Back Loan Scheme for the small firms. Now the loan amount can be further extended up to 10 years and it is possible to suspend the repayments for up to 6 months.

The VAT cut that was introduced for the hospitality and tourism-related firms has been further carried forward till the end of March 2021. Firms have the option to spread the payments over around 11 smaller VAT bill repayments.

  • How Outsourcing your Accounting can prove useful

In the current economic situation, a penny saved has become a penny earned. Considering this, having a clear picture of the state of the accounts of your business can prove to be enormously useful. Cash flow is extremely crucial at a time like this when business is down and you need to take inventory of what expenses are required. Having your accountant go over your cash flow details and send you an analysis of where you are spending should help cut down on the unnecessary costs.

The government has seen a massive depletion in funds over the past few months with £39bn solely expended on the furlough scheme. Thus, the new wage support scheme is capped at £700 (lower than furlough) which would still be £300m as a monthly cost to the government.

With all these changes it becomes very difficult for an employer to focus on the changing payroll needs, processing claims, keeping a tab on the changes in VAT and the like. Therefore, getting things done by an accountant can prove to be both times saving and hassle-free.

To be successful in these trying times a business will have to be able to innovate and readily accept the use of new technology as well as new practices. Doshi outsourcing can assist you here as you will have the comfort of working with people who believe in UK standards of accounting and are aware of the compliances as well. Communication is no longer a barrier as the lockdown has proved to all of us. Businesses that have learnt to adapt and embrace remote working have managed to thrive despite the pandemic. Outsourcing is one way forward as even the pandemic has served to prove that we are all living in an increasingly global world.