The mini-Budget boost for small companies

Government cash is on offer for small businesses that retain staff and recruit new workers.

Engineer and apprentice
Firms are entitled to £1,500-£2,000 for each new apprentice they hire
(Image credit: © Getty Images/iStockphoto)

Small and medium-sized enterprises (SMEs) planning to recruit or retain workers as the pandemic eases may now be eligible for support, courtesy of chancellor Rishi Sunak’s mini-Budget last week. It offered firms a range of cash payments if they retain staff and bring in new apprentices.

The money could alter the judgements you make about staffing in the months ahead. Your first decision is how to manage the withdrawal of the Job Retention Scheme, which is being phased out between now and the end of October. The cost of continuing to employ staff on furlough is set to increase steadily until then as the state tries to wean businesses off the support. But at the end of January 2021, you’ll receive a £1,000 bonus for every member of staff you furloughed if they’re still employed at your business.

The cash is designed to encourage companies not to make staff redundant as the furloughing scheme winds down. But bear in mind that you will be responsible for more wage costs from next month, as the terms of the scheme change so that employers become responsible for staff pension and national insurance contributions. There are further changes in September and October – and from November onwards, furloughing ends altogether. In most cases, the £1,000 bonus next year will therefore be relatively small beer compared with the cost of continuing to employ staff currently furloughed until then. Assess whether there is work for your employees to return to and whether you can afford to keep them, even after the cash.

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The government has not yet said whether company directors who furloughed themselves will be eligible for the £1,000. In theory, assuming directors have abided by the conditions of the Job Retention Scheme and then return to work, they should be covered. But the small print of the plan has yet to be published.

Bring on the trainees

Meanwhile, England-based SMEs are also entitled to participate in the government’s drive to encourage apprenticeships. From 1 August, you’ll be entitled to a £2,000 payment for each new apprentice you hire under the age of 25 – and £1,500 for each new older one. The scheme runs until 31 January, so for SMEs inclined to hire new staff at junior levels, apprenticeships are worth considering.

Another option is the new Kickstart Scheme, which effectively offers employers financing if they offer work placements. Businesses offering six-month placements that meet certain criteria will be able to claim the cost of paying these recruits for up to 25 hours a week at the national minimum wage, plus national insurance and pension contributions. As with apprenticeships, this could be an affordable way of bringing new blood into the business, with ministers hoping many placements will lead to job offers. Clearly, however, the extent to which you can take advantage of any of these schemes will depend on the levels of demand your business expects. Tough decisions await those businesses that do not anticipate customers returning for some time.

David Prosser
Business Columnist

David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.