The Chancellor yesterday set out the details on how the Coronavirus Job Retention Scheme (CJRS) will continue to support jobs and businesses, following the earlier announcement of an extension of the scheme on 12 May. So far, the CJRS has enabled 1 million employers in the UK to furlough 8.4 million jobs.
The Chancellor said that from 1 July, businesses will be given the flexibility to bring furloughed staff back on a part-time basis. This is a month earlier than previously announced and is designed to help support people as they return to work. Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them - and will be responsible for paying their wages while in work.
From August 2020, the level of the Government grant provided through the job retention scheme will be slowly tapered to reflect that people will be returning to work. That means that for June and July the Government will continue to pay 80% of people’s salaries. In the following months, businesses will be asked to contribute a modest share, but crucially individuals will continue to receive the 80% of salary covering the time they are unable to work.
The scheme updates mean that the following will apply for the period people are furloughed:
June and July: The Government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.
August: The Government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
September: The Government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER 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.
October: The Government will pay 60% of wages up to a cap of £1,875. Employers will pay ER 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: “Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses. We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.
“Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining among the most generous in the world.”
The Chancellor also announced that those eligible under the Self-Employment Income Support Scheme (SEISS), which has so far seen 2.3 million claims worth £6.8 billion, 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.
Dame Carolyn Fairbairn, Director-General of Confederation of British Industry (CBI), said: “The Government’s support throughout the lockdown so far has been a lifeline for businesses, employees and the self-employed. The changes announced will help ensure the schemes stay effective as we begin a cautious recovery.
“Introducing part-time furloughing at the same time as more stores and factories start to open will help employees to return to work gradually and safely. Many more businesses will feel supported during this vital restart phase.
“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.”
Stephen Phipson, CEO of Make UK, the manufacturers’ organisation, commented: “It is welcome news for manufacturers that monetary support to businesses through the Job Retention Scheme will remain unaltered for the next two months giving businesses much-needed time to recover order books and start to get production levels back on track. Crucially the Chancellor has also delivered the flexibility which industry so desperately needs to bring its workforce back in a staggered way allowing for imaginative working patterns until business recovers.
“Industry has always accepted that the Government could not continue to pay indefinitely and understands that cost to the taxpayer had to be reduced. But this gradual increase in the amount companies contribute to their employee wage bill will buy companies vital time before they are asked to take on the full cost burden.
“The Chancellor has protected many more jobs and kept vital skills within the sector to help power the economic recovery which the country so needs as we come out of the Covid-19 crisis and the extension of the Self-Employment Income Support Scheme will also help protect vital elements of the supply chains as we go forward.
Adam Marshall, Director General of the British Chambers of Commerce (BCC), said: “The Chancellor has listened to business communities and struck a careful balance that will help many firms bring furloughed staff back to work flexibly over the coming months.
“The gradual reduction in furlough contributions from the Treasury will give businesses additional time to rebuild their income streams and cash flows, and the decision to give businesses maximum flexibility to bring people back part-time will be appreciated.
“The extension of support for the self-employed will come as welcome relief for those who have seen their livelihoods impacted by the virus. It is right that this group continues to receive similar levels of support to those on PAYE.”