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HM Government's Proposed Wage Subsidy

20 March 2020
This article outlines what we expect that the Chancellor, Rishi Sunak, will include within the Wage Subsidy to be announced today.  It looks at what other Governments have done and what the UK might implement.

We have seen the Government announce measures to stimulate the economy and assist companies and employees through this difficult period by allowing statutory sick pay claims from day one; business rates relief; loans; and grants from local authorities.  However, this has not stopped employers looking to reduce their wage bills and lay off staff.  Today, Rishi Sunak is going to announce a wage subsidy which will hopefully support employers and enable them to retain their staff. 

What will the wage subsidy look like? We have seen similar measures introduced throughout the globe. It may take the form of those already introduced such as:

  1. Hong Kong announced a HK$10,000 cash handout for all permanent residents over the age of 18;
  2. New Zealand introduced the opportunity to claim for wage subsidies. There is up to $585 available a week per full-time employee with the package which is only available for the first 21 employees;
  3. Denmark has promised to cover 75% of salaries for private companies for three months if they agree not to lay staff off; 
  4. Ireland has announced that private sector workers affected by coronavirus are to receive a new higher level of sick pay of €305 per week from their first day of illness; and
  5. Canada's emergency aid plan included a new Emergency Care Benefit of up to $900 biweekly, up to 15 weeks, to provide income support to workers, including the self-employed, who have to stay home and don't qualify for paid sick leave or employment insurance.

The likelihood is that the UK's wage subsidy will incorporate aspects of the above with funds being given through employers to employees.  HM Revenue & Customs does hold the payroll information from employers so should be able to pass the funds through in the form of "reverse NICs" where the funds go in the opposite way to usual PAYE payments.

What Rishi Sunak needs to provide for is those self-employed workers and workers in the gig economy on zero hour contracts where it is not so easy to assess and distribute the funds.

We anticipate it may take the form of a similar system to New Zealand with a set fee paid restricted to a number of employees.

 

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