Summer Economic and Immigration Statement: A Note for Employers - | Hudson McKenzie

Summer Economic and Immigration Statement: A Note for Employers

The Coronavirus Job Retention Bonus:

On Wednesday 8th July 2020, Chancellor of the Exchequer Rishi Sunak announced the introduction of a Jobs Retention Bonus. This is an incentive for employers to rehire their furloughed staff in exchange for a monetary payment paid by the UK government to employers.

“Our message to business is clear: if you stand by your workers, we will stand by you.”– Rishi Sunak, Chancellor of the Exchequer.

The Coronavirus Job Retention Scheme closed to new applicants for the furlough scheme on 10th June 2020. The scheduled date by which the scheme will cease operating is 31st October 2020 and so from 1st November 2020, employers will be required to pay their staff their full salaries. This will be without any financial support from the UK government.

During this period between now and 31st October, this is crunch time for employers. Employers must now make the decision on whether to re-employ their furloughed staff and pay their full salaries from November or make them redundant. Employers must also be aware that they must start contributing 10% towards the current 80% of furloughed employees salaries accounted for by the UK government from September. These employer contributions will further augment to 20% in October 2020.

However, it goes without saying that there will be much uncertainty over the next coming months in terms of how much demand will pick up across multiple sectors. With the CJRS nearing a close and major retail businesses such as John Lewis and Boots proclaiming the cutting of thousands of British jobs, there is much of a scary prospect that the UK’s unemployment rate will rise rapidly.

The underling purpose of this scheme is to attach employees to employers until demand increases. As a means of achieving this, the Job Bonus Retention scheme will pay employers a one-off payment of £1000.00 for each individual furloughed employee they choose to return to work up to January 2021, subject to eligibility conditions. This is very much with the intention to reduce the rate of redundancies and the fluctuation of the UK’s employment rate in an uncertain labour market.

Mr Sunak has further added:

“We will pay businesses to hire young apprentices, with a new payment of £2000.00- and we’ll introduce a brand-new bonus for businesses to hire apprentices aged 25 and over, with a payment of £1500.00”.

The UK government have also promised employers that they will pay employers for taking on trainees and endorsing apprenticeship schemes over the course of the next six months. In addition, for each individual trainee employers hire, they will receive £2000.00 as a way of investment in traineeships and encouraging employers to continually recruit workers.

The Response:

 Ultimately, these bold measures have been endlessly applauded by business leaders. Business owners will now receive extended support upon exiting the CJRS and recruiting both their current and new staff.

Although this can be viewed as further sustained support for the UK’s economy and business recovery, the amount of economic uncertainty and uncertainty in the job market may reduce the effectiveness of this new scheme. Although all sectors have suffered impacts from COVID-19, the extent of these impacts vary from sector to sector. With some more scarred than others, it goes without saying that certain employers may not be able to take advantage of these incentives due to financial instability.

The UK Immigration Bill:

On Tuesday 30th June 2020, the newly proposed and reformed points-based immigration bill succeeded all the required stages in the House of Commons, receiving parliamentary backing by 342 votes to 248. It is now due to stand before the upper chamber, the House of Lords, before it is scheduled to take effect on 1st January 2021. Should it win another majority in favour of the bill in the House of Lords, this will solidly confirm its implementation from 1st January 2021. This will signal an end to free movement and a major departure from the European Union.

The list below suggests some possible outcomes from the immigration bill for businesses and employers:

  • A reduction in annual immigration of long-term EU workers

It is estimated by the UK government that within 5 years of the bill’s implementation, the immigration rate of this group will significantly fall by 70%. In turn, this could total an overall monetary cost of between £1 billion and £3 billion for UK businesses over the first 5-year period due to a tremendous fall in long-term EU worker inflows.

  • A reduction in EU student immigration
  • An increment in non-EU student immigration

It is also estimated that immigration of this group will increase by approximately 10%, with enrolments increasing by an average of 25,000 in the first five years of the bill’s launch.

What this will mean for universities is their projected university tuition fee income will increase substantially, by between £1 billion and £2 billion in the first five years of the policy.

  • An increment in annual immigration of long-term non-EU workers

Because the immigration bill lowers the skills threshold as well as the salary thresholds, it is predicted that immigration levels of this group could increase by between 10,000 and 30,000 per annum.

Impact Assessment:

Upon the drafting and reviews of the latest Immigration bill, the Migration Advisory Committee (MAC) produced an Impact Assessment, illustrating what could happen to UK migration levels once the legislation comes into effect.

However, the research conducted by MAC is based on multitudinous assumptions and therefore, it must be remembered that this assessment will contain a level of uncertainty to an unknown extent. Hence, what it attempts to demonstrate is an array of possible outcomes of the policy.

Some of the following pointers have been derived from the assessment:

  • Many sectors will see a tremendous fall in the inflows of EU workers
  • Approximately 151 middle skilled occupations will be better qualified to employ non-EU workers. This is because of the reduction is skills and salary requirements for some non-EU nationals planning to come and work in the UK
  • London is predicted to be the least affected city by the Immigration bill. Although it has the largest migrant population in the UK and employs most EU workers in the UK, its supply of higher wages and share of EU migrants being prevented to work there long-term will be lower than regions such as Northern Ireland, Yorkshire and the Midlands.

Although these may be some sound predictions and incomes, this report does not consider the impacts and implications imposed by the pandemic. This may further impact the research and statistics this report contains.

Should you have any queries regarding the above information or if you are an employer or employee in need of legal expertise, please get in touch with a legal professional at Hudson McKenzie via email at londoninfo@hudsonmckenzie.com or by telephone +44(0)20 3318 5794.

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