Companies to pay 10% and 20% of furlough from September and October

Rishi Sunak, Chancellor of the Exchequer has announced that employers will start having to pay towards the cost of the Coronovarius Job Retention Scheme (CJRS), from September companies must pay 10 per cent and then 20 per cent in October of the 80 per cent of wages the furlough scheme entitles to employees.

The amendments to the scheme outline that employers will also pay National Insurance Contributions (NICs) and pension contributions from August onwards. Workers will be allowed to work part-time whilst on furlough from 1st July instead of 1st August which was previously announced. Employers have to pay the full amount of salary for the time worked where the CJRS will cover 80 per cent of the remaining days that did not see the employee at work.

Ideally, by November the scheme will have come to a close.

Mr Sunak said:

Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.

Two weeks ago I outlined the principles of my approach. The furlough scheme will stay open all the way until October. We will ask employers to start contributing as we also introduce flexible furloughing and employees will see no change to their level of support.

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. But I understand too that business and employers have been through and incredibly difficult time. So I have decided to ask employers to pay only a modest contribution introduced slowly over the coming months.

Neil Carberry, CEO of the Recruitment and Employment Confederation (REC) said:

The Chancellor is right to turn his attention to how we recover. With the claimant count unemployment already above two million, we face a crisis of a scale not seen for many decades. Recruitment and staffing industry firms are the specialists in helping people find work and companies to grow – we are ready to support Government to deliver innovative new plans to tackle unemployment.

Mr Sunak also extended the Self-Employed Income Support Scheme (SEISS) after receiving a letter that was sent to the chancellor signed by a cross-party group of 113 MPs asking him to prolong financial support to the self-employed where contractors and freelancers can claim 80 per cent of their earnings, from HM Revenue & Customs (HMRC). This was originally set to end this weekend.

They are now eligible to apply for a “second and final” grant in August. Like the previous financial assistance provided to the self-employed, this will be paid in one installment in August, of up to £6,570.

Applications for this grant will open in August, still, the scheme will only cover 70 per cent of the contractor’s wages.

Mike Cherry, national chairman of the Federation of Small Businesses (FSB) said:

Our five million-strong self-employed community will be greatly relieved to know that the income cliff-edge they were facing in two days’ time has now been removed.

The hope is that more and more sole traders will be able to return to work safely as restrictions are eased. Policymakers have rightly recognised that self-employed business owners working in a lot of sectors – not least hair and beauty, events and travel – will be massively impacted by the current downturn for many weeks to come.

However, Seb Maley, CEO of Qdos, who offers insurance and tax advice for the self-employed is not as happy with the scheme. Qdos has found that 77 per cent of contractors do not think the Job Retention Scheme offers enough support.

The Government will continue to support millions of self-employed people, but hundreds of thousands of freelancers and contractors have been left stranded, with their needs overlooked yet again.

Individuals working via their own limited company have been all but ignored. The longer the situation plays out, the worse things get. Many have had projects cancelled, told their contract won’t be renewed and are under pressure to reduce rates. But unlike employees and sole traders, they don’t qualify for substantial support.

Those who have lost work because of COVID-19 and slip through the cracks of the Government help will likely need to rely on savings to survive. But nearly one third have no safety net. They need a financial lifeline from the Chancellor, who must rethink the support available to this vital sector of the independent workforce.