Government bail out
Chancellor Rishi Sunak has thrown a further lifeline confirming that the Government will now extend Furlough for a further five months to the end of March and increase the self-employed support package amongst other support measures.
Individual and business support
Throughout the pandemic, the Government has tried to protect lives and safeguard jobs with an unprecedented £200 billion support package to date. The furlough scheme has protected over nine million jobs across the UK, and self-employed people have also received over £13 billion in support. This is in addition to billions of pounds in tax deferrals and grants for businesses
The Coronavirus Job Retention Scheme (“CJRS”) will now run until the end of March 2020 with employees receiving 80% of their current salary for hours not worked.
There are currently no employer contribution to wages for hours not worked. Employers will only be asked to cover National Insurance and employer pension contributions for hours not worked. For an average claim, this accounts for just 5% of total employment costs or £70 per employee per month.
It is expected that Employers will have flexibility to use the scheme for employees for any amount of time or shift pattern, furloughing employees on either a full-time or part-time basis, and will be able to vary the hours worked in agreement with the employee. Neither the employer nor the employee needs to have previously claimed or have been claimed for under the CJRS to make a claim under the extended CJRS.
An employer will be able to claim for employees who were employed and on its PAYE payroll on 30 October 2020. Employees who were made redundant or stopped working after 23 September 2020 can be re-employed and claimed for.
The CJRS extension will be reviewed in January to examine whether the economic circumstances are improving enough for employers to be asked to increase contributions.
Why a change of heart
The extension of the scheme is said to be to give certainty over winter months of financial security and protect jobs and livelihoods. There has been acceptance that the economic impact of the pandemic are much longer lasting than the duration of restrictions and therefore limiting the financial support to periods of national lockdown were deemed insufficient.
Self Employed Income Support Grant
The next self-employed income support grant will also increase from 55% to 80% of average profits - up to £7,500.
Support for millions more workers through the Self-Employment Income Support Scheme (SEISS) will also be increased, with the third grant covering November to January calculated at 80% of average trading profits, up to a maximum of £7,500.
The Jobs Retention Bonus (JRB) will not be paid in February and the government will redeploy a retention incentive at the appropriate time. The purpose of the JRB was to encourage employers to keep people in work until the end of January. However, as the CJRS is being extended to the end of March 2021, the policy intent of the JRB falls away.
Impact of the extension
Many commentators are of the view that the chancellors announcement is too little too late with many businesses already having failed to survive the devastating economic impact of the virus. Under the original scheme, launched in March 2020, the Government contribution tapered down, and at it’s minimum was 60% in October. Requiring businesses who were already struggling to survive to make higher contributions plunged many into liquidation and the point of no return or forced their hand to make redundancies which it now materialises could well have been avoided.
Whilst the Government have made changes due to the changing and evolving feat of the pandemic, is it really feasible to expect businesses to bring back employees who were made redundant, and put them back on furlough? Technically those who were made redundant after 23 September can be put back on the scheme, but where the finer details of the scheme will be reviewed in January, including possible contribution levels, how can businesses make informed decisions?
For further advice on furlough and retention of staff during the pandemic, please contact a member of our Employment Team on 0808 164 8532.
Further information and guidance will be provided once updated are made available following Government announcements. Information correct at the time of writing, for up to date guidance please click here: