COVID-19: Coronavirus Job Retention Scheme to end in October and additional assistance for the self-employed

The government has set out in detail how employers will have to start sharing the cost of the scheme.

From August, employers must pay National Insurance and work placed pension contributions, then 10% of pay from September, rising to 20% in October.

Workers will also be allowed to return to work part-time from July so ‘those who are able to work can do so’. In this scenario, employees will be paid their normal pay for the hours they work, with the element of the week where they don’t work, then covered by the Job Retention Scheme.

To date 8.4 million workers are having 80% of their salaries paid for by the government – up to £2,500 a month – under the scheme, which was originally intended to last until the end of July.

The Chancellor had already confirmed the scheme will run to the end of October, but this latest announcement clarifies exactly how employers will start contributing.

Furloughed workers will continue to get 80% of pay until the end of October, but by then 20% of their salary will have to be met by employers.

So far employers’ claims under the scheme have reached £15 billion, but the scheme is expected to cost the government approx. £80 billion in total.

Chris Bowles, Director at Old Mill comments: ‘Clearly the Coronavirus Job Retention Scheme is not sustainable long term but it’s really important that businesses get clarity on the transitional arrangements as Mr Sunak’s scheme is wound down.

There’s a fine balance between getting the economy going and maintaining support for businesses as we try to plan ahead. These withdrawal arrangements are more gradual than some commentators had predicted and, importantly, avoid the so-called ‘cliff-edge’ scenario that many feared.

Inevitably it won’t be the perfect solution for all businesses and it will be a case of doing scenario planning to work through the numbers on whether employees can be brought back as we start to emerge out of lockdown and the recovery begins.

It’s a sad fact that some jobs won’t exist, and some businesses won’t survive this crisis, but we now have a level of certainty that enables business owners to make informed decisions. The time available until the scheme finishes, hopefully can be used by business owners and their advisers to effectively plan and structure their businesses such that they are in as good a position as they possibly can be as we emerge from this crisis.’

From 1 July onwards claims for CJRS will be restricted to employers currently using the scheme and previously furloughed employees. This means that the final date by which an employer can furlough an employee for the first time will be 10 June for the current minimum three-week furlough period to be fulfilled. 

From 1 July, employers will only be able to furlough employees that have been furloughed ‘for a full three-week period’ prior to 30 June.

Employers will have until 31 July to make any claims in respect of the period prior to 30 June.

The scheme will close to new entrants from 30 June.  From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three -week period prior to 30 June.

In a measure aimed to help support people in getting back to work, from 1 July, businesses can also bring furloughed staff back part-time, a month earlier than previously announced. It will be down to individual firms to decide what part-time means. Employers will be able to set the hours and shift patterns that employees will work when they return, but companies will have to pay wages for the hours they work.

From 1 August the level of government grant will be reduced ‘to reflect that people are returning to work’. Furloughed workers will continue to receive 80% of their pay, but from August it will include a growing employer contribution. It will start with firms paying NI and pensions in August, plus 10% of pay in September, rising to 20% in October.

Further guidance on flexible furloughing and how employers should calculate claims will be published on 12 June.

Find out more information on how the Coronavirus Job Retention Scheme is changing.

In August, the government will pay 80% of wages up to a cap of £2,500 as they do now but employers will have to pay NI and pension contributions. It’s estimated that for the average claim this represents approx. 5% of the gross employment costs the employer would have incurred had the employee had not been furloughed.

In September, the government will cut its grants to 70% of wages up to a cap of £2,190. Employers will pay NI and pension contributions and 10% of wages to make up the 80% total up to a cap of £2,500. This works out at 14% of the average gross employment costs the employer would have incurred.

In October, the government grant will be cut to 60% of wages up to a cap of £1,875. Employers will pay NI and pension contributions and 20% of wages to make up the 80% total up to a cap of £2,500. This is 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.

Under SEISS 2.3 million people have applied for a single grant of up to £7,500 to date.

The government also announced that self-employed people whose work has been affected by coronavirus will receive a ‘second and final’ grant of up to £6,750 in August.

How the scheme works

Self-employed workers who qualify have been in line for a grant of 80% of their average profits, up to £2,500 a month for three months. This is being paid in one instalment.

Those whose work has been adversely affected by coronavirus will still be able to apply for this lump sum until 13 July 2020.

Rishi Sunak has confirmed applications for a second taxable grant will open in August, at a date to be determined.

This second grant covers 70% of the applicant’s average monthly trading profits and will also be made in a single payment, covering three months and capped at £2,190 a month, or £6,570 in total. Applicants will need to confirm their work has been adversely affected by the virus, but they would not need to have taken the first grant to be eligible for the second.

As previously, directors who take a large amount of their income in the form of dividends from their companies and the newly self-employed, look likely to miss out on the government’s updated self-employment support package.