The Chancellor’s Summer Statement 2020

The surreal year which has been 2020 continued yesterday with the unusual step of a “Summer Statement” from The Chancellor of the Exchequer, Rishi Sunak.  The reason for such an additional announcement is, of course, the on-going challenges for the nation around COVID19. 


I believe it’s not overstating the situation to say that the virus has – to some degree – impacted every single individual, business, organisation, and governing body in the United Kingdom over the last few months.  The challenges have been huge, and they are certainly very far from over.  Aside from the human cost, the fiscal damage has been significant.  Indeed Sunak said yesterday;

“in just two months our economy contracted by 25% - the same amount it grew in the previous eighteen years”

Accordingly yesterday’s statement focussed on how to help restart the economy, and in particular what support could be offered to support the return to work that millions of employees and employers now urgently want and need to initiate.  For the full package of measures announced please see this link.

A Plan for Jobs

The purpose of this post though is not to pick through all the detail of the announced proposals (some of which are sector specific anyway), but instead to look more directly at what the announcements might mean for retention & recruitment, and by extension Employee Benefits provision too.

We do however need to touch on some of the specific points covered to achieve this aim, the most notable being the government support for “furloughed” employees, known as the Coronavirus Job Retention Scheme (CJRS).  For full details on the scheme as of last month please see this post

As most readers of this article will already be aware, the CJRS had already been extended from its original end date until 31st October 2020, with the level of support provided being gradually reduced (“tapered” in the terminology of government documents) from August onwards.  Some business groups representing the hardest-hit industry sectors had called for a further extension of the scheme, but yesterday the Chancellor ruled that out.  His decision was based on a number of factors including costs, the “false hope” of a job that no longer really exists, and the loss of skills that might be associated with a long period away from the working environment.

The Jobs Retention Bonus

To replace the CJRS the Chancellor announced a new Jobs Retention Bonus (JRB) scheme.  The JRB will pay employers a sum of £1,000 for each of their employees successfully returned from furlough to “meaningful work” in the period November 2020 to end of January 2021.  Importantly this sum will only be paid at the end of that period, so the initial cost-shock of an employee leaving furlough and fully returning to the employer’s payroll will not be covered until later.

Will this be enough to sway employers to avoid redundancies and return workers to the payroll?  Only time will tell, but unless social distancing suddenly disappears (or becomes less problematical to implement) then many might sadly conclude that the potential “reward” doesn’t offset the immediate financial risk. 

Others will welcome the scheme however, and of course many employers were already fully intending to return workers to the payroll at the end of October (or before) anyway, so the JRB will represent a welcome and unexpected financial boost for them in these difficult times. 

Further details on the JRB are promised before the end of July.

“Kickstarter” scheme

Which takes us to the other big jobs announcement; The introduction of the “Kickstarter” scheme.

Here the government are not looking to protect jobs, instead create new ones.  In the forefront of their thinking is the need to support those leaving education and joining the jobs market, and also providing support to young workers that have been disproportionately impacted by the work crisis.  Indeed Sunak said;

“under 25’s are two and half times as likely to work in a sector that has been closed”

The concerns are that both groupings could end up long-term unemployed, with all the social and economic problems that this potentially might bring the nation. 

Kickstarter aims to tackle this problem by virtue of the government paying the wages of a young person (aged 16 – 24) for a period of six months, plus an additional amount towards pension contributions and employer National Insurance costs.  Payments will be based on the relevant National Minimum Wage scale, and presumably at the minimum Automatic Enrolment pension rate also.

But all the above is conditional on this being a “new” job.  Quite how that will be quantified and assessed is not currently clear.  Likewise the jobs offered should be of “good quality”, and the Chancellor’s speech suggested that employers will also be providing Kickstarters with;

“training and support to find a permanent job.”

That’s quite a big shopping list of requirement and challenges for employers to tick-off in exchange for a free six-month work placement.  It will therefore be interesting to see if employers are particularly keen on this approach given the many other deep and immediate challenges of the moment.

In addition to the Kickstarter scheme, government is also providing some additional funding around traineeships, apprenticeships, universal skills, and careers advice.

So what about Employee Benefits?

So what, if anything, is the cross-over with Employee Benefits provision?

Firstly, and as mentioned above, it looks like Pensions Auto-Enrolment duties will apply to Kickstarter workers.  What’s not so clear from the currently available documents is whether assessment and enrolment will be undertaken by the government or employer.  But for speed and convenience it may well be a duty that ends up with the employer. 

Yet even if the duty of assessment and enrolment does fall to the employer, the assessment levels of salary will often be very low.  So it’s probably unlikely that many Kickstarters will end up being automatically enrolled into a pension scheme.

Of course pensions are only one element of the “traditional” Employee Benefit package in the United Kingdom, and also the only one required by UK legislation.  So should employers provide Kickstarters with access to the other Employee Benefits* on offer to their workforce?

Cost may well be a factor here, but the levels of cover might be very low or even negligible, which if anything should make the cost lower and the decision that much easier too.  And the return on such a small cost will be the goodwill that is likely to positively influence employee engagement, which in turn can help output and productivity too.

Yet it really shouldn’t be just about cost and return alone. As I covered in my recent posts on Group Life Assurance and Group Income Protection, there are moral, practical and reputational risks for employers to consider too.  Plus of course keeping every Kickstarter fit and in the workplace is no less important than any other employee, and will also help productivity too.  So it follows that some form of access to at least basic medical treatment would also be sensible as well.

These items might usually seems of relatively minor importance for such young workers, but given the nation remains in the midst of a national medical emergency, that view might well have been overtaken by the reality-check of events.

 

So it looks like the well-intentioned government interventions of the last few days perhaps raise as many questions as they answer at this point in time.  Will these measures help employers retain workers and create jobs for new ones?  Only time (and a bit more detail) will tell.


For more information on any of the above topics, please speak to your usual Howden Consultant in the first instance, or visit our Employee Benefits page for other contact options. For the latest details on COVID-19 & Employee Benefits provision please visit our coronavirus hub.

(Published 09/07/20)

 

*Some Employee Benefit offerings might need to change their rules and/or criteria to allow for new categories of employees.  Seek help from Howden if you are looking at this option.

Steve Herbert

Steve is Head of Benefits Strategy, Howden Employee Benefits & Wellbeing, and is an award-winning thought leader on Pensions, Employee Benefits, and Human Resources issues. He is occasionally accused of making Employee Benefits interesting.

Steve Herbert

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