Coronavirus: key updates for employers and the self-employed

In his press conference last Friday Rishi Sunak quashed reports that the Self-Employment Income Support Scheme (SEISS) would end soon by announcing its extension, with those eligible to claim a second and final grant capped at £6,570. He also outlined the further details that we have been long awaiting on the extension of the Coronavirus Job Retention Scheme (CJRS), including flexibility to bring furloughed employees back part-time in July, and a new taper requiring employers to contribute to furloughed salaries from August. Both schemes are UK wide.

Self-Employment Income Support Scheme (SEISS)

Those eligible under the 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 broadly 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.

Key information:

  • Individuals can continue to apply for the first SEISS grant until 13 July. Under the first grant, eligible individuals can claim a taxable grant worth 80% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total. Those eligible will have the money paid into their bank account within six working days of completing a claim.
  • Applications for the second grant will open in August. Individuals will be able to claim a second taxable grant 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.
  • The eligibility criteria are the same for both grants, and individuals will need to confirm that their business has been adversely affected by coronavirus. An individual does not need to have claimed the first grant to receive the second grant: for example, they may only have been adversely affected by COVID-19 in this later phase. Further guidance on the second grant will be published on Friday 12 June.

Coronavirus Job Retention Scheme (CJRS)

The Chancellor also set out more details on how the Coronavirus Job Retention Scheme (CJRS) will continue to support jobs and businesses as people return to work, following his original announcement on 12 May that the scheme would be extended.

This announcement had alluded to the first change to the furlough scheme being from 1 August 2020, with some form of employer contribution to staff costs expected. Whilst such a change is indeed going to happen (see below), there is to be an earlier change to the scheme introduced from 1 July 2020. From this date, businesses will be given the opportunity to bring presently furloughed employees back part-time. This is a month earlier than previously announced and aims to help support people back to work. Individual employers 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 notably, employers will be responsible for paying employees’ wages whilst they are in work.

As expected, from 1 August 2020, an employer contribution to staff costs of those still being furloughed will be required. The level of government grant provided through the job retention scheme will be tapered slowly to reflect that people will be returning to work. And broadly, based on the current information available, the government and employers are to share the relevant costs.

The scheme updates mean that the following will apply for the period that 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. According to the Chancellor, 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% in total, up to a cap of £2,500. According to the Chancellor, 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. According to the Chancellor, for the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.

One key point to highlight is that employees who are furloughed in this period must continue to receive 80% of their salary covering the time they are unable to work and on furlough. For example, it includes those who perhaps have been brought back to part-time work/part-time furlough). So, the employer has to decide whether it can afford to fund the balance that the government is no longer paying.

Also, a very important point to note is that, only those employees who are currently on furlough under the existing scheme can be furloughed from 1 July (see more detail below).

Important Compliance Point for Employers

Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked. Employees who believe they are not getting their 80% share can also report any concerns to the HMRC fraud hotline. HMRC have been directed not to hesitate to take action against those found to be abusing the scheme.

Further information from the government

The following are sourced from the Chancellor’s press conference and government sources:

  • Around 40% of employers have not made a claim for employer NICs costs or employer pension contributions and so will be unaffected by the change in August if their employees’ employment patterns do not change.
  • Many smaller employers have some, or all of their employer NIC bills covered by the Employment Allowance so will not be impacted significantly.
  • Around 25% of CJRS monthly claims are below the thresholds where Employer NICs and automatic enrolment pension contributions are due, and so no employer contribution would be expected for these payments to furloughed employees in August.
  • To enable the introduction of part-time furloughing, and support those already furloughed back to work, claims from July onwards will be restricted to employers currently using the scheme and previously furloughed employees. The current scheme will close to new entrants on 30 June, with the last three-week furloughs before that point commencing on 10 June. This means that this (10 June) will be the final date by which an employer can furlough an employee for the first time. Employers will have until 31 July to make any claims in respect of the period to 30 June.
  • From 1 July, employers will be able to agree any working arrangements with previously furloughed employees.
  • When claiming the CJRS grant for furloughed hours, employers will need to report and claim for a minimum period of a week for grants to be calculated accurately across working patterns.
  • The updated SEISS and CJRS schemes will continue to operate UK-wide according to the timings set out above.
  • If an average claim lasts eight months, the total cost of employer contributions would represent around 5% of the gross employment costs an employer would have incurred had the employee not been furloughed.


OUR REACTION

Coronavirus Job Retention Scheme (CJRS)

The overall response to the CJRS announcements from businesses and industry has been a positive one, particularly as the level of employer contribution from August is not as much as many had expected.

However, in amongst the praise, commentators, such as Dame Carolyn Fairbairn, Director-General of Confederation of British Industry (CBI), have cautioned that more help may be needed for certain sectors.

She said: “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.”

Business challenges

Leisure and hospitality businesses, such as pubs and restaurants, will be amongst the last sectors that can re-open and hence it may not be possible for these businesses to part fund their furloughed staff costs.

Potential challenges also lie ahead for certain employers who may now need to start making difficult decisions and judgements regarding their staff requirements. They will have to assess how long it may take for their top line income to return as some of the social distancing restrictions are only being eased gradually. There is also more caution about the economy in general and many customers may look to limit, or even stop spending in certain areas altogether.

How we can help

Please contact us now about any concerns you have regarding staffing requirements, as we can point you in the direction of our trusted employment law contacts for guidance and advice.

Some clients may need to act quickly to make decisions on staff leading up to 1 July and beyond, especially as there are statutory notice periods that might come into play under employment law that you need to adhere to, depending on your current thought process. If needed, our team can also assist you with cashflow projections or sensitivity analysis; for example, by modelling different turnover and staff cost scenarios.

Self-Employment Income Support Scheme

The SEISS announcement came as a positive surprise to us all. Thankfully, the government has listened to the petitions and lobby groups, as it was widely expected and reported right up to Thursday evening that no further support would be available.

Derek Cribb, CEO of the Association of Independent Professionals and the Self-Employed (IPSE), commented: “It will be an overwhelming relief to self-employed people who are eligible for SEISS that their support has been extended. It is very welcome that the Chancellor has once again heeded our calls and taken steps to get many of the self-employed, who are particularly struggling in the Coronavirus crisis, the income support they so badly need.”

However, as with many of the government support measures brought in as a result of COVID-19, there have been some people who have not been eligible for any support, and in some cases this has seemed unjust or unfortunate, as they perhaps fell just the wrong side of a criteria or test. And for those self-employed people who may have just missed out on the initial SEISS grant, the fact that a further final grant is available may just rub salt into the wound.

For further information or advice on any of the issues raised, or for help with services like bookkeeping, cash flow management or payroll during the Coronavirus pandemic, please call us on 01225 325580, email info@richardsonswift.co.uk, or contact your usual client director.

Please note that this is only a summary of the main issues and should not be construed as advice. Every effort has been made to ensure factual accuracy at the time of publication (1 June 2020), however, the government response to the Coronavirus situation is changing 24-7, so it should not be relied upon completely.