As the government slowly begin lifting lockdown restrictions in an effort to allow for businesses to re-open as safely as possible, they are also gradually planning on how to withdraw the financial support schemes which are fundamentally unsustainable. Experts and politicians have widely agreed that complete withdrawal suddenly, whilst the pandemic is still ongoing, will lead to a disastrous “cliff-edge” impact. As a result, Chancellor Rishi Sunak announced on the 29 May 2020 that there would be an extension for both the Coronavirus Job Retention Scheme (CJRS) and the Self-employment Income Support Scheme (SEISS), but warned that changes would be made to reduce reliance upon them. Below, we outline the timelines as to when new changes will come into place, what you may need to prepare for and how it may impact you.
Surprise second grant offer for SEISS
Whilst there was early indication that the CJRS would be extended, there was less certainty for freelancers and the self-employed, who called for the Chancellor to provide equal support for the sector. Sunak has since confirmed that there will be a second but final grant offered which has been reduced to 70% of average trading profits, and also capped at a reduced amount of £6,570 (down by £930 pounds from the first £7,500 cap that was offered).
The scheme will open for application in August and the eligibility criteria remains the same as before. Applicants do not have to have claimed for the first grant in order to be able to access the second grant, but will need to confirm again (if claiming for a second time) that their self-employment income has been adversely affected due to Coronavirus. As with the first issue of the grant, a lumpsum will be paid to cover three months (June, July and August) which will be the final payment. The date as to when payment will be received has not yet been disclosed but is expected to be announced 12 June 2020.
The first grant is still open to new applicants but be aware that it ends 13 June 2020. The HMRC online portal for applications can be accessed here.
CJRS to come to a tapered end
It comes as no surprise that the CJRS must come to an end. It is impossible for the government to sustain such amounts of payment and must instead turn their attention to best supporting businesses to be able to re-open and resume operations, as well as bring back employees as safely as possible. With that being said, the Chancellor has announced changes to the scheme that will allow for such transition without leaving employers to carry full costs themselves immediately.
From 1 July 2020, employers will be given the option to bring back furloughed staff part-time. Previously the rules state that any furloughed worker must not be performing work duties in order to receive furlough pay, however this change now allows for employers to see their staff return to the workplace and they may want to use the opportunity to put Covid-secure measures in place. Individual companies are able to set their own hours and shift patterns and the government have not provided guidance on minimum or maximum number of hours employees are able to work.
From August 2020 the government will continue to pay 80% of wages up to the original cap of £2,500 however employers will be asked to contribute full employer National Insurance and pension contributions (where applicable). Prior to this, employers have not been required to make any contribution towards furloughed staff wages or associated costs such as Nation Insurance and workplace pension schemes.
As of September 2020 the government will begin reducing the amount of financial support from 80% down to 70% of wages with a cap of up to a maximum of £2,187.50. Employers are expected to continue paying for Employers’ National Insurance, pension contributions, plus begin paying 10% of the employee’s salary. This means that the employee will still be receiving 80% of their average salary where 70% is contributed by the government and 10% is funded by the employer. The total salary an employee can receive is still capped at up to £2,500 per month (where they remain on furloughed worker status but can begin working part-time).
Come October 2020 the government will make another reduction to funding and only provide 60% of wages up to a maximum cap of £1,875. Employers at this point will need to continue paying Employers’ National Insurance, pension contributions and 20% of staff salaries. At the end of October, the government are expected to withdraw from all financial support and the CJRS will come to a close, meaning employers will have to take on 100% of the costs for providing staff wages.
More Information on Flexible Furloughing
Throughout the duration of CJRS, employers have had the ability to bring staff back from furlough status after three weeks and put them back on for another three weeks. Some employers have been using this option to rotate staff in employment to support as many their team members as possible. The CJRS scheme will be closed to new entrants from 30 June 2020 which means that if an employee has to this date never been made furlough, they will not be eligible to enter the scheme after this date. In practice this means any employee who needs to be made furloughed for the first time must be done so by 10 June 2020.
From July, when employers are allowed to bring staff back part-time, it will be crucial to keep accurate records of what hours your part-time staff are working. During days where they are back at the workplace or performing normal duties, they need to be paid their normal 100% salary. On days where they are not required to work, they will receive 80% of their salary as provided by the CJRS. This information will need to be uploaded onto the online portal for claims as usual.
If you have been struggling to manage payroll, particularly during these times, then you may want to consider outsourcing payroll to a firm of chartered accountants. Alternatively, if you have questions and need help now, please see our Payroll service page.