Coronavirus Job Retention Scheme (CJRS) and Self Employed Income Scheme (SEIS) – Employers told they ‘have to help pay for furloughed workers’ by contributing towards their salaries and an extension to the SEIS.
At today’s Coronavirus briefing to the nation the Chancellor, Rishi Sunak announced, as expected, that employers will need to contribute to their furloughed workers’ salaries from August 2020 – as the Government admitted the scheme cannot run “indefinitely” and the scheme needed to be cut back due to Government concerns about its spiralling cost and the likely impact on the UK’s growing public spending deficit.
During the briefing the Chancellor outlined the reasons for the changes to the CJRS, which to date has covered the wages of 8.4 million staff in the UK unable to work during lockdown – at a cost of £15 billion. The scheme was recently extended until the end of October, but when this was announced a few weeks ago, the plan was to introduce an employer contribution from August. Without this extension, there was a risk that many workers would be left without work and without support.
CJRS currently provides a grant towards 80% of workers’ salaries up to £2,500 per month. The Chancellor had already confirmed that furloughed staff would continue to receive the same wages as before, but with a reduced Government share and it has now been confirmed that the employer will have to contribute a percentage of salaries, as well as National Insurance and pension contributions from August 2020. To ease towards this the Chancellor proposed the following:
- August 2020 – the employer will pay the National Insurance (‘NI’) and auto enrolment pension costs, which is equivalent to 5% of the overall employment cost;
- September 2020 – the Government will pay 70% of salaries up to £2,190 and the employer will pay 10%, plus the NI and auto enrolment pension costs;
- October 2020 – the Government will pay 60% of salaries up to £1,875 and the employer will pay 20%, plus NI and auto enrolment costs.
The scheme is to be closed to new entrants from 30 June. This will help cap the bill to the Treasury, but also prevent employers from rotating staff who are currently not working with those who have spent recent weeks at work. To be able to claim for a furloughed worker, they will need to be furloughed by 10 June, to allow the 3 weeks on furlough in accordance with the minimum requirements.
From 1 July part time furloughing will be introduced to provide more flexibility in the scheme for employer’s to bring furloughed workers back. This will mean that a worker could work for 2 days in a week on full pay, fully funded by the employer, and be furloughed for the other 3 days with pay being met in accordance with the CJRS.
In addition, following calls from a number of his fellow MPs and business representatives, the Chancellor announced the extension to the scheme supporting self-employed workers past its expiry on Sunday. This will allow another payment to be made in August 2020, based on 70% of the average profits across a three month up to £6,570.
These changes will ensure the continued effectiveness of the scheme, as businesses start to re-open and part time furloughing will enable employees to return to work gradually and safely. However, employers groups have warned that this dramatic change to the scheme at the end of July will lead to tens of thousands of redundancies. The Institute of Directors said that a quarter of its members using the job retention scheme risked going bust if they were forced to make any contribution towards furloughed workers’ wages and similar comments have been made by Dame Carolyn Fairbairn of the CBI and the Hospitality Sector.