The Coronavirus Job Retention Scheme extended until the end of September 2021
The Coronavirus Job Retention Scheme began in March 2020 and was introduced to assist both employees and employers from the impact of the coronavirus pandemic. The Scheme currently pays 80% of an employee’s wages when they are unable to work during the pandemic. At a cost of almost £50 billion, it has protected 11 million jobs so far and has already been extended twice with a further extension recently revealed until the end of September as part of the Budget for 2021. The price of not extending it would probably lead to a further rise in unemployment, which has already reached a new rate of 5.1%, the highest figure for five years.
What is furlough?
Employers might need to put some or all of their employees on temporary leave (‘furlough’) during the coronavirus pandemic. This means an employee can agree with their employer to be put on furlough to stop work temporarily but remain employed or to work some of their usual hours and be put on furlough for the hours they did not work; this is ‘flexible furlough.’
Who can be furloughed?
Employers can put someone on furlough provided they were employed on or before 30 October 2020. They do not need to have been on furlough before.
Employers can furlough employees who are temporarily unable to work because they are shielding, they have childcare responsibilities whilst the schools are shut or if they are caring for a vulnerable person in their household.
Extension of The Coronavirus Job Retention Scheme
Under the latest extension, employers will pay 10% of the furlough in July and 20% in August and September.
From 1 July 2021:
- the government will pay 70% of wages, capped at £2,187.50
- the employer will need to contribute 10% (up to £312.50)
From 1 August to 30 September 2021:
- the government will pay 60% of wages, capped at £1,875 each month
- the employer will need to contribute 20% (up to £625)
As with the Scheme when it was first introduced back in March 2020, the employer should decide whether they will top up furloughed employees’ wages to 100% however, they are not obliged to.
Redundancy Pay and Notice Pay
When calculating Statutory Redundancy Pay or Statutory Notice Pay for furloughed staff, the employer must use the employee’s full normal pay, not their reduced furlough rate.
What furloughed staff can and cannot do
Furloughed staff can do:
- volunteer work – as long as it is for another employer
- training to keep their skills up to date
Furloughed staff cannot:
- do tasks or activities that make money for their employer
- provide a service for their employer
How many people have been furloughed?
- 11.2 million jobs have been supported by the scheme since March 2020
- About 4.7 million people are currently on furlough (up to 31 January 2021)
- The highest take-up rate has been in the hospitality industry with 1.2 million jobs furloughed (as of 31 January 2021)
- 4 out of 10 employers are using the furlough scheme
What help are self-employed getting from the government?
A fourth grant from the Self-Employment Income Support Scheme will be available from April 2021.
The Self-Employment Income Support Scheme is set at 80% of 3 months’ average trading profits, paid out in a single instalment and capped at £7,500. The fourth grant will take into account 2019 to 2020 tax returns and will be open to those who became self employed in the 2019/20 tax year – the rest of the eligibility remains unchanged.
Who can claim the fourth grant?
You must be a self-employed individual. To work out your eligibility, your 2019 to 2020 Self Assessment tax return is first looked at – your trading profits must be no more than £50,000 and at least equal to your non-trading income. If you are not eligible based on your 2019-2020 Self Assessment tax return, the tax years 2016-2017, 2017-2018 and 2018-2019 are then looked at.
You must have traded in both tax years:
- 2019 to 2020 and submitted your tax return by 2 March 2021
- 2020 to 2021
You must either:
- Be currently trading but are impacted by reduced demand due to coronavirus
- Have been trading but are temporarily unable to do so due to coronavirus
You must also declare that:
- You intend to continue to trade
- You reasonably believe there will be a significant reduction in your trading profits due to reduced business activity, capacity, demand or inability to trade due to coronavirus
The UK government also announced that there will be a fifth and final grant covering May to September. You will be able to claim from late July if you are eligible for the fifth grant. The fifth grant will be determined by how much your turnover has been reduced in the year April 2020 to April 2021.
The fifth grant will be worth:
- 80% of three months’ average trading profits – capped at £7,500 (for those with a turnover reduction of 30% or more)
- 30% of three months’ average trading profits – capped at £2,850 (for those with a turnover reduction of less than 30%)