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job retention scheme (CJRS) and self-employed income support scheme (SEISS), with taxpayers’ contributions gradually withdrawn from August

Source – Accountancy Web

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.

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