How the local furlough scheme grant will work for your small business

 Chancellor Rishi Sunak, Local Furlough Scheme concept

Chancellor Rishi Sunak is expected to announce government will cover two thirds of wages for firms hit by hard lockdown

UPDATED: The government will cover two thirds of staff wages for small businesses ordered to close in areas hardest hit by Covid.

Firms blindsided by the highest lockdown level will have 66 per cent of staff wages covered, up to a maximum of £2,100 a month.

To qualify, employees must be off work for a minimum of seven consecutive days.

>See also: Rishi Sunak plans grants for small businesses hit by hard lockdown

However, employers must still cover National Insurance and pension contributions.

The scheme will begin on November 1 and will be available for six months, to be reviewed in January.

Manchester, Liverpool and other areas of the North are expected to go into harder lockdown early next week, once the government launches its new traffic-light system for dealing with coronavirus outbreaks.

London is expected to follow shortly, following a warning from Mayor Sadiq Khan.

Increased cash grants for SMEs

In addition to expansion of the Job Support Scheme, the government is increasing the cash grants to businesses in England shut in local lockdowns.

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.

  • SMEs with a rateable value of or below £15,000 can now claim cash grants of £1,300 per month
  • SMEs with a rateable value below £51,000 can claim £2,000 per month
  • Larger firms can claim £3,000 per month
  • Firms can claim these payments after two weeks of closure

Announcing the scheme, Chancellor Rishi Sunak said: “The expansion of the Job Support Scheme will provide a safety net for businesses across the UK who are required to temporarily close their doors, giving them the right support at the right time.”

Mike Cherry, national chairman of the Federation of Small Businesses, said: “These new measures will bring some hope to those businesses which are still bearing the brunt of restrictions, six months on from the first lockdown, and are likely soon to have further restrictions expanded to include them.”

Meanwhile help for hospitality businesses forced to close in Scotland will get their own £40m support package.

The new local furlough scheme is more generous than the JSS, announced last month as the successor to the Coronavirus Job Retention Scheme, which ends on October 31.

>See also: Local lockdowns only make the problem of late payment worse

Every business in the UK is eligible for the JSS from November, which covers one third of the wages for staff on days they are not working due to coronavirus. Business owners cover the other 33 per cent on days not work, with employees taking a one-third pay cut.

What that means in actuality though is, if an employee is working the minimum one third of their usual hours, then the government is only covering 22 per cent of their wages.

Critics have pointed out that it would be cheaper for a small business to keep on one staff member full time than to retain three part-time workers through the scheme.

Further reading

Covid expected to cost small businesses £69bn

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