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The Chancellor, Rishi Sunak, has announced three important updates to the Job Retention Scheme.
Firstly, the concept of flexible furloughing has been brought forward by a month to 1st July 2020. This will enable businesses to bring furloughed employees back to work on a part-time basis.
It will be left for the individual business to determine the best approach for their circumstances but there are some considerations to bear in mind:
HMRC will publish further guidance on flexible furloughing and the details for employers to calculate claims on 12th June.
The Job Retention Scheme will close to new entrants from 30th June. Thereafter, employers will only be able to furlough employees have been furloughed for a full three-week period prior to 30th June.
As a result, 10th June is the final date by which an employer can furlough an employee for the first time.
Employers will have the deadline of 31st July to make any claims in respect of the period to 30th June.
From 1st July, there are three significant changes to how the scheme will operate:
The optionality will remain for the employer to make the claim ahead of an imminent payroll run, at the point payroll is run or after payroll has been run.
From August, to continue to use the Job Retention Scheme, the employer will start to share some of the costs.
This will be on a tapered monthly basis between August and October but, throughout the period, the employee must continue to receive the 80% of their normal salary capped at £2,500.00.
In August, the employer will be required to pay the Employer’s National Insurance and pension contributions. It is estimated that, for the average claim, this represents 5% of the total cost.
In September, in addition to the Employer’s National Insurance and pension contributions, the employer will be required to cover 10% of the pay. Overall, this will equate to roughly 14% of the total cost.
In October, the level of the pay element for the employer will increase to 20% making the inclusive percentage covered by the employer up to 23%.
Official figures estimate that in the region of 40% of employers are not making a claim for Employer’s National Insurance and pension contributions, so the financial impact of the change would be less severe.
Whilst the tapered approach is sensible as part of a strategy to re-energise the economy, it does beg the question of how many businesses will even this limited contribution be too much.
The Chancellor also announced that Self-Employment Income Support Scheme will be extended, and we will review the details in our next newsletter.
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