- 1st June 2020
- Posted by: Suzy Hill
- Category: Business News, COVID-19 NEWS
Covid-19: Furlough and self employment support schemes amended
Chancellor Rishi Sunak has announced changes to the government’s coronavirus support schemes, including part time working and a tapered employers’ contribution, and a second grant payment for the self employed
From 1 July, under the Coronavirus Job Retention Scheme, businesses will be given the flexibility to bring furloughed employees back part time, a month earlier than previously announced.
However, claims from July onwards will be restricted to employers currently using the scheme and previously furloughed employees. The scheme will close to new entrants on 30 June, with the last three-week furloughs before that point commencing on 10 June.
Individual firms will decide the hours and shift patterns their employees will work on their return, and will be responsible for paying their wages while in work.
From August 2020, the level of government grant provided through the job retention scheme will be tapered, with employers’ contributions increasing, to reflect that people will be returning to work.
In June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (NICS) and pension contributions. Employers are not required to pay anything.
In August, government payments remain as before, but employers will be required to pay employer NICS and pension contributions. Government analysis indicates that for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
In September, the government’s contribution to furlough wages will fall to 70%, up to a cap of £2,187.50. Employers will pay employers NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.
In October, the government furlough contribution falls to 60% of wages up to a cap of £1,875. Employers will pay employer NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
Chancellor Rishi Sunak said: ‘Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked.
‘Employees who believe they are not getting their 80% share can also report any concerns to the HMRC fraud hotline. HMRC will not hesitate to take action against those found to be abusing the scheme.’
Alongside the furlough scheme, those eligible under the self-employment income support scheme (SEISS), which has so far seen 2.3m claims worth £6.8bn, will be able to claim a second and final grant in August.
The grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
Individuals can continue to apply for the first SEISS grant until 13 July. Applications for the second grant will open in August.
The eligibility criteria are the same for both grants, and individuals will need to confirm that their business has been adversely affected by coronavirus.
An individual does not need to have claimed the first grant to receive the second grant, for example in circumstances where they may only have been adversely affected by Covid-19 in this later phase. Further guidance on the second grant will be published on 12 June.
Carolyn Fairbairn, CBI director general, described the government’s support throughout the lockdown so far as ‘a lifeline for businesses, employees and the self employed’.
‘Firms understand the scheme must close to new entrants at some point and that those using it in future will need to make a contribution to help manage the costs.
‘However, previously viable firms not able to open until later, particularly in leisure, hospitality and the creative industries, may need further assistance in the coming months,’ Fairbairn said.
This point was echoed by Michael Izza, ICAEW chief executive, who said it was right the scheme should evolve to match government’s phased approach to re-opening the economy.
‘In that spirit, allowing employees to return to work part-time from 1 July is a sensible move, and in principle it is fair that employers should be prepared to take some of the financial burden off the tax-payer as businesses start up again.
‘However, we would like to see a higher level of support retained for sectors which will still be barred from doing business, such as hospitality and leisure.
‘Otherwise there is a real risk for these companies that a sudden increase in staff costs, without the ability to generate revenue, will cause a wave of avoidable redundancies and closures,’ he said.
Nimesh Shah, a partner at Blick Rothenberg, cautioned on a potential spike in support costs for the government.
‘To take advantage of the flexible furlough scheme, businesses will need to furlough employees they want to include by 10 June so that they are eligible under the new scheme – this could result in a wave of new registrants of workers which may not have otherwise been placed on furlough.
‘The government needs to be wary of more workers being placed on furlough, which will increase the cost of the scheme. Also, there will be a natural hit on productivity if workers are being unnecessarily placed on furlough because businesses want to take advantage of the flexible furlough arrangements.’ Shah said.
Kate Palmer, associate director of advisory at global employment law consultancy, Peninsula, said: ‘This will see employers being able to bring furloughed employees back on a part time basis; the hours worked will be funded by the employer, and the scheme will continue to cover employees for the remaining working days of the week.
‘Although the employer contribution is to be phased in slower than expected, a lot of businesses will not be ready to take the hit of these extra costs.
‘Employers in the hospitality sector, and others who were forced to close down by the government, and have seen up to a 100% drop in takings with no fixed date yet for re-opening, will be amongst the hardest hit.’