Update On Part-time Furlough, Changes To The Coronavirus Job Retention Scheme And The Second Self-employed Income Support Scheme.
On the 28th of May, the Chancellor Rishi Sunak announced plans to end the eight-month coronavirus job retention scheme (CJRS) and self-employed income support scheme (SEISS) by gradually withdrawing taxpayers’ contributions from August.
Whilst outlining his plans Mr Sunak said that he intends to reduce contributions to the furlough scheme as it “cannot continue indefinitely”. This means that in the final phase of the eight-month scheme employers will be asked to “contribute, alongside the taxpayer, towards the wages of their staff”.
CJRS Next Steps
The CJRS or furlough scheme will continue in its current form, paying 80% of employees’ wages up to £2,500 with no employer contribution until the end of July. However, from August employers’ will be expected to pay a “modest contribution”.
This ‘modest contribution’ will involve stepped increases:
August – Employers will only have to cover national insurance and employer contributions, which is around 5% of total employment costs.
September – The government furlough contribution will drop from 80% to 70%, the employer is obligated to pick up the 10%.
October – Employers will pay 20%, whilst the government’s contribution will reduce to 60%.
After this, at the end of October the Government contributions will cease and the scheme will come to an end.
The coronavirus job retention scheme will close to new entrants from 30 June. From this date onwards, employers will only be able to furlough employees who have been furloughed for a full three-week period prior to 30 June.
Therefore, the final date which an employer can furlough an employee for the first time will be the 10th of June (in order for the current three-week furlough period to be completed by 30 June.)
The Chancellor also announced the introduction of part-time furloughing which means that businesses can bring employees back to work part-time in July. This announcement was made much sooner than was initially expected. Additionally, to the surprise of many, the Chancellor also committed to extending the self-employed equivalent scheme, this means that applications for the slightly reduced second and final grant will open in August.
As detailed above employers will have the opportunity to prepare for the end of the furlough scheme, however, due to calls by business owners for a more flexible approach, the part-time furlough scheme will also be available from the 1st of July.
The part-time furlough scheme will enable workers to return part-time whilst still receiving a grant for the time when they are not working.
How Will It Work?
Under the part-time furlough scheme, a furloughed 5 day week worker could return for two days and would be paid as normal, whilst the government would cover the other three days pay under the CJRS.
The government will pay 80% of wages for any employees’ normal hours which they do not work up until the end of August.
Employers will be in charge of deciding the hours and shift patterns which their employees will work on their return. They will also be responsible for paying their employees’ wages in full for the hours which they work.
This means that employees can work as much or as little as the business needs, with no minimum time that they can furlough staff for.
The part-time furlough scheme must apply to a time period of at least one week and be confirmed to the employee in writing. Longer periods such as on monthly or two weekly cycles can also be claimed for.
Employers will need to submit data on the usual hours an employee would normally work in a claim period and the actual hours worked.
Who Is Eligible?
Part-time furlough is only available for current furloughed workers, therefore, the scheme will close to new entrants from the end of June.
This gives employers until the 10th of June to add any new employees to the scheme.
The government stated that further guidance on flexible furlough and how employers should calculate claims will be published on 12 June.
How Will This Affect Businesses
The changes to furlough contributions will undoubtedly cause employers to have to make more complicated calculations. This may become especially problematic when salary periods don’t match up to the calendar month.
Despite these complications, the continued option to furlough employees and the introduction of part-time furlough will provide much-needed support to businesses in need.
Adam Marshall, the director-general of the British Chambers of Commerce, said: “The gradual reduction in furlough contributions from the Treasury will give businesses additional time to rebuild their income streams and cash flows.”
Extension of the SEISS
The self-employed income support scheme was only expected to last for the initial 3-month period, however, on the 28th of May, the Chancellor announced news of a final grant.
The second stage of the self-employed scheme will provide a grant of 70% of self-employed workers average monthly trading profits. The eligibility criteria for the second grant hasn’t changed and individuals will have to confirm that they have been adversely affected by Covid-19.
However, you do not have to have claimed the first SEISS grant in order to be eligible for this second grant.
Making A Claim
The scheme will open for applications in August, and as before the money will be paid in a single instalment covering three months’ average monthly profits. However, the cap has been reduced to £6,570, down from the £7,500 cap of the first grant.
As with the first SEISS grant, eligible individuals must make the claim themselves. Accountants and bookkeepers are not permitted to do it on their behalf. Any attempt to make a claim on behalf of a client will trigger a fraud alert.
However, we can help our clients to prepare by ensuring that they have the relevant information ready. The claims process is fairly simple and HMRC will calculate the amount of self-employment support individuals will receive, they don’t need to do this themselves.
In the meantime, if any self-employed people need access to the SEISS grant now, they can make a claim for the first SEISS grant up until the 13th of July.
In order to apply for SEISS you will be required to confirm to HMRC that your business has been adversely affected by Coronavirus.
You will also need your:
- Self Assessment UTR
- National Insurance number
- Government Gateway user ID and password
- Bank account number and sort code you want HMRC to pay the grant into (only provide bank account details where a Bacs payment can be accepted)
You will be told straight away if your claim has been successful and if it has you will receive your payment within 6 working days.
You can find more information on the process of applying for SEISS in our blog here.
Help And Support
We are here to guide you through the CJRS and provide the information you need regarding the furlough scheme. Our team of payroll specialists have created a downloadable guide to the Coronavirus Job Retention Scheme which you can access if you click here.
Although we are unable to make claims for the self-employed income support scheme on behalf of our clients we are still here to support you.
You can also find more information about support for businesses affected by Coronavirus here.