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Furlough scheme and SEISS to be tapered off

The Chancellor has announced plans to end the eight-month coronavirus job retention scheme (CJRS) and self-employed income support scheme (SEISS), with taxpayers’ contributions gradually withdrawn from August

29th May 2020
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Admitting that the furlough scheme “cannot continue indefinitely”, the Chancellor Rishi Sunak outlined his plans on Friday evening during the Downing Street press briefing to reduce taxpayer contribution towards the furlough scheme, but with the flexibility to bring employees back part-time in July.

“I believe it is right, in the final phase of this eight-month scheme to ask employers to contribute, alongside the taxpayer, towards the wages of their staff,” said Sunak.

And in a surprising twist, the Chancellor also committed to extending the self-employed equivalent scheme for the same period, with applications for the slightly reduced second and final grant opening in August.

Furlough next steps

Recognising that businesses have been through an “incredibly difficult time”, the Chancellor started his speech by revealing how the slow introduction of the employers' CJRS contribution will work.  

The furlough scheme will continue in its current guise, paying 80% of employees’ wages up to £2,500 with no employer contribution. But from August employers’ will be expected to pay a “modest contribution”.

At first, the Chancellor explained, employers will only have to cover national insurance and employer contributions, which he said accounts for 5% of total employment costs.

The main change comes into force from September when the government furlough contribution drops from 80% to 70%, with the employer having to pick up the 10%. Sunak reasoned that from this point, “employers will have had the opportunity to make any necessary changes to their workplaces and business practices”.

Then in October, the final stage of the furlough scheme, employers will have to pay 20%, with the government’s contribution shrinking to 60%. After this, the government contributions will finish and the scheme will come to an end.

Part-time furlough

Although employers will have to prepare for the inevitable end of the scheme, the Chancellor has listened to large and small businesses' request for a more flexible furlough.

As Sunak announced earlier this month, a new element of furlough 2.0 is to enable workers to return part-time whilst still being under the scheme – and this aspect will arrive one month earlier than originally planned, from 1 July.

To illustrate how the scheme will work, Sunak used the example of how a furloughed worker could return for two days and would be paid as normal, while the government would cover the other three days.  

However, Sunak added that the introduction of part-time furloughing means the scheme will have to close to new entrants from the end of June, as the flexible aspect is restricted to current furloughed workers. This gives employers only until 10 June to add any new employees to the scheme. 

The accompanying government factsheet explains that further guidance on flexible furlough and how employers should calculate claims will be published on 12 June.  

Surprise extension of the SEISS

Freelancers and self-employed workers who had urged the Chancellor to extend the SEISS in line with furlough scheme were handed a lifeline at the end of Sunak’s speech, with news of a final grant.

The self-employed scheme will open for applications in August, but with the grant reduced to 70% of their average monthly trading profits. As with the SEISS scheme, the money will be paid in a single instalment covering three months’ average monthly profits up to £6,570, down from the £7,500 cap of the first grant. 

The government has not changed the eligibility criteria for the second grant. As with the first version, individuals will have to confirm that they've been adversely affected by Covid-19. However, a self-employed worker does not have to have claimed the first SEISS grant in order to be eligible for this final handout.  

The self-employed income support scheme has so far supported 2.3m people with claims worth £6.8bn. The first grant is still open for applications but self-employed workers have until 13 July to apply.

Community Reaction

AccountingWEB readers expecting a quiet weekend are now dreading the daunting prospect of the revised furlough scheme’s finer detail. “Some of these calculations are going to be horrendous especially where salary periods don't match up nicely with the calendar month,” noted PandoraSleeps.

Meanwhile, Blick Rotherberg’s Nimesh Shah raised concern on the possible impact of flexible furlough. “The government needs to be wary of more workers being placed on furlough, which will increase the cost of the scheme,” he said. “There will be a natural hit on productivity if workers are being unnecessarily placed on furlough because businesses want to take advantage of the flexible furlough arrangements.”

Stakeholders lined up to praise the government's support. Mike Cherry, the national chair of the Federation of Small Business, called both schemes "a true lifeline for all those protected by them". 

Adam Marshall, the director general of the British Chambers of Commerce, said: "The gradual reduction in furlough contributions from the Treasury will give businesses additional time to rebuild their income streams and cash flows."

And Derek Cribb, CEO of IPSE said the SEISS extension was an "overwhelming relief to self-employed people". 

The story so far

First announced in March, the furlough scheme has supported more than 8m jobs and was slated to initially last for “at least three months”. However, the Chancellor extended the scheme until October as the UK gradually eases the lockdown and attempts to adjust to some form of normality.

The Chancellor promised the changes would come before 31 May, but as the month fast approached June, AccountingWEB readers were anxious to hear the news so they could prepare.

“I really don't think the government understand how people want to plan," said AccountingWEB regular and FD Tom123. “I need to know whether I can bring staff back on Monday without possibly jeopardising furlough claims going forward for those same staff. After the close of business on Friday is really not going to be helpful.”

To get more detail about both the revised CJRS and SEISS, view this week's AccountingWEB Coronavirus Q&A webinar with Kate Upcraft and Emma Rawson of AAT.

Replies (20)

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By SteveHa
30th May 2020 07:01

And so many staff in the hospitality industry will lose their jobs, and many of those business will go to the wall, as long as their closure remains enforced. With no monies coming in, how are they going to meet the outgoings.

Rather a short sited policy, IMO.

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By clark.hall
30th May 2020 14:37

Well done AWeb for managing to report late Friday evening. Helps to keep the site relevant.
Quite a wait now until 12 June to understand the detail of these new arrangements

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By firtrees
31st May 2020 08:35

To enable the second phase of the CJRS an employer has to have made a claim in the 1st phase, but HMRC have said the employees need to have been furloughed no later than 10 June to enable access to second phase.

In one case, staff have been out for 8 weeks and are now being brought back for 1 week before going off again on like a rota basis. Do they all need to be on furlough for the last 3 weeks in June to enable access to the second phase?

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By Matrix
31st May 2020 09:23

No of course not, you say yourself that they needed to have already been furloughed by 10 June and this has clearly been met if they have already been furloughed for 8 weeks.

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Replying to firtrees:
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By crofte
01st Jun 2020 11:25

I think a rigid, hard approach would probably be 'yes' because a furlough block has to be a minimum of 3 weeks and that will be broken if they are not working on the 10th. However, that seems to go against the spirit of the scheme as the government wants people to go back to work even though most businesses are not going to be able to get back to 100% capacity with social distancing, so they can't have it both ways.....can they?

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By NeilW
01st Jun 2020 11:17

This is completely the wrong way to go about it.

The furlough scheme should be transitioned to a Default Payroll paid directly by the Bank of England who simply tops up anybody registered with another PAYE scheme who hasn't received the Living Wage in that week.

People on the Default Payroll end up on the Volunteer List and can be called upon to assist the NHS, or whatever. The state is paying for the time, so it should be able to use it if required.

That gets the whole thing off the plate of business and let's them get back to the day job, while allowing them to pull people back to work as required.

The Default Payroll acts as a powerful automatic stabiliser putting money exactly where it is required across the country, and taking it away again from areas where the recovery is strongest.

We can add Self-employed people to this if we want by transitioning SE people to running a PAYE for their drawings - rather than class 2/class 4. Which goes someway to addressing other issues in that area.

As it stands we're in danger of ending up in the worst of all worlds. Killing weaker areas of the nation and overcooking the stronger bits.

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By mkowl
01st Jun 2020 12:06

With astute thinking like that and a common sense approach - then there is no chance that the politicians and Civil service could come up with that

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By janet.gee
01st Jun 2020 12:26

And if your business is still not allowed to open so that you have had no income coming in since the end of March but have still had to to pay rent etc with the result that any cash reserves are severely depleted ( or worse) , how are you supposed to be able to afford this??? I forsee redundancies by the bucket load in certain sectors. Or am I missing something?

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By Donald MacKenzie
01st Jun 2020 12:27

It is a mistake to expect employers to pay for staff when not working. Requiring employers to contribute will prompt some to make staff redundant as they cannot pay without work being done. The 80% was probably too high already and is a strong disincentive to going back to work. If the support received fell from 80 to 70 to 60% it would increase the willingness to go back to work.

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By kar999
01st Jun 2020 16:54

Duplicate post.

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Replying to Donald MacKenzie:
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By kar999
01st Jun 2020 14:03

Donald MacKenzie wrote:

It is a mistake to expect employers to pay for staff when not working. Requiring employers to contribute will prompt some to make staff redundant as they cannot pay without work being done. The 80% was probably too high already and is a strong disincentive to going back to work. If the support received fell from 80 to 70 to 60% it would increase the willingness to go back to work.

Is it obligatory for the employer to top up from 60-70% to 80% or just pay the employee the lower percentages if cash flow is tight?
Previously employers could pay just the 80% or up to full pay depending on what they could afford.

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Replying to kar999:
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By kar999
03rd Jun 2020 01:27

Having since read the latest guidance I understand employers must make payments up to the full 80%.

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By kar999
03rd Jun 2020 01:27

Having since read the latest guidance I understand employers must make payments up to the full 80%.

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By duncanp
01st Jun 2020 12:48

We had the majority of our staff furloughed from 1st April to 19th May but they are mainly back at work now. However, we may have to re-furlough from August to October - do people think we will be able to do this or will the fact that they were not furloughed for the 3 weeks to 30th June preclude us from doing so?

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By kathyk0410
02nd Jun 2020 12:09

Have you received any update on this as we are also querying this. Lots of articles imply that the employees have to "currently furloughed" as at 30.06.20 though we have clients you want to bring some staff back in late June though will not have enough work for them over the summer and want to take up the part time furlough. They will have been on a claim just not on furlough as at 30.06.20. Any link to an answer would be appreciated.

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By CatsandDogs
02nd Jun 2020 16:28

Me too - this is the burning question I would like an answer to. There are 2 possible scenarios and we need to know for sure which applies:
- Either a member of staff that has been furloughed at any point between 1st March and 30th June is eligible to return to work part time in July and have their furloughed hours covered, or
- Staff can only have part of their hours covered in July if they were furloughed from 10th to 30th June specifically - regardless of their furlough status prior to this.
HMRC - we need an answer!

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Replying to CatsandDogs:
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By CatsandDogs
02nd Jun 2020 17:07

Responding to my own question as I managed to have a webchat with HMRC: Answer copied and pasted:
Me:
Either a member of staff that has been
furloughed at any point between 1st
March and 30th June is eligible to
return to work part time in July and
have their furloughed hours covered,
or- Staff can only have part of their
hours covered in July if they were
furloughed from 10th to 30th June
specifically - regardless of their furlough
status prior to this.

Robert: 4:41PM
The first part is correct. The 10 - 30th
June is referring to if you are claiming
furlough for employees for the first time.
Robert: 4:41PM
As it is a 3 week period before June still
for the minimum furlough time, so they
need to be on furlough latest
10/06/2020 to qualify

Me:
Great - so if an employer is rotating
employees on furlough or has brought
staff back full time but doesn't have
enough work for full time they can be
part furloughed as long as they have
been furloughed at some point since
1st March for at least 3 weeks.

Robert: 4:45PM
Pretty much, if they have been
furloughed previously then they can be
brought back 'for any amount of time
and shift pattern, while still being able
to claim CJRS grant for their normal
hours not worked'

Hope that this helps somebody else...

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Replying to kathyk0410:
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By CatsandDogs
02nd Jun 2020 17:08

duplicated

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By daviddaniels
01st Jun 2020 14:28

With regards to employees being on furlough before the end of June, what about an employee who is currently on SMP, but is scheduled to return to work in August? What happens then?

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By Martymcfly
01st Jun 2020 15:27

“employers will only have to cover national insurance and employer contributions, which he said accounts for 5% of total employment costs.“ How can it only be 5% when NI is 13.8%? And pension at least 3%??

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