Changes to the Coronavirus Job Retention Scheme
On Friday 29th May 2020, the Chancellor of the Exchequer Rishi Sunak announced a number of changes to the Coronavirus Job Retention Scheme ("the Scheme"). The changes were softer than many anticipated and will take effect over the next few months.
The Chancellor began by outlining the scope of the Scheme which, as of midnight on the 24 May 2020, had been utilised by one million employers to protect around 8.4 million jobs with the total value of claims amounting to £15 billion.
The headline points announced are:
- Employers will be required to start contributing to employee's wages under the Scheme;
- From 1st August, employers will have to have to pay employer national insurance contributions (NICs) and pension contributions and can no longer reclaim them through the Scheme;
- From 1st September the government will pay 70% of employees' wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay employer NICs and pension contributions and 10% of wages to make up the 80% total up to a cap of £2,500;
- From 1st October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay employer NICs and pension contributions and 20% of wages to make up the 80% total up to a cap of £2,500;
- The cap will be proportional to the hours not worked; and
- The Scheme is going to be closed 31st October and the Chancellor has confirmed that it will be closed to new entrants from the 30 June 2020.
A further key aspect of the announcement is the introduction of "flexible furloughing". The Chancellor announced that part-time working will be permitted under the Scheme and that this has been brought forward from 1st August to 1st July.
The flexible furloughing scheme will allow employers to bring employees back to work who have previously been furloughed. This will be for any amount of time and any shift pattern.
The employer will still be able to claim under the Scheme for the employee's normal hours not worked but will have to pay the employee in full at 100% for any hours worked and will be responsible for tax and national insurance contributions on those payments.
It is important to once again remind employers that to be eligible for the grant they have to agree with their employees any new flexible furloughing arrangements and confirm that agreement in writing.
Further guidance on flexible furloughing and how employers should calculate claims will be published on the 12th June 2020.
This is a welcome change to the scheme as many employers look to re-open their businesses and by bringing forward the date for the flexible furloughing arrangements whilst limiting the employer's financial contribution, the government are continuing to try and cushion the impact of the coronavirus on the economy.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.