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Changes to the Coronavirus Job Retention Scheme

1st June 2020 | News

On Friday evening the Chancellor, Rishi Sunak, announced further details on the extension of the Coronavirus Job Retention Scheme (CJRS) which we’ve outlined below.

As of midnight on 24 May 2020, the scheme had been used by 1 million employers, to protect around 8.4 million jobs and the total value of claims made was £15 billion.

Changes to the Self-Employed Income Support Scheme were also announced but we will follow up with this information is a separate email.

What’s Changing?

The Chancellor has announced three changes to the CJRS:

  1. From 1‌‌ July 2020, the scheme will be made more flexible to enable employers to bring furloughed employees back on a part-time basis and still receive a grant for the time they are not working.
  2. From 1‌‌ August 2020, employers will have to start contributing to the wage costs of paying their furloughed staff; this employer contribution will gradually increase in September and October.
  3. The scheme will close to new entrants on 30‌‌ June 2020.

How Will it Work?

For July, the grant will work as before, the lesser of 80% of pay or £2,500. The intention is then that the Government will reduce their contributions over the remaining months of the scheme, August to October, with a corresponding increase in the employer contribution as follows:

  • August – the CJRS will continue to pay 80% of wages
  • September – the CJRS will pay 70% of wages while employers will take on the other 10%
  • October – the CJRS will pay 60% of wages while employers will take on the other 20%

The changes are displayed in the table below.

July August September October
Government Pays Employers NICs & Pension Cost Yes No No No
Government Contribution to Wages 80% up to £2,500 80% up to £2,500 70% up to £2,187.50 60% up to £1,875
Employer Contributes to Employers NICs and Pension No Yes Yes Yes
Employer Contribution to Wage £0 £0 10% up to £312.50 20% up to £625
Employee Receives 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month

How Will The Changes Affect My Wage Costs?

The following table illustrates the phased costs for an employer, based on a furloughed member of staff with a salary of £1,380 per month, which is the average claim amount received by HMRC.

The current cost to employers (for employees on £36,000 or less and 80% pay) is £0, however as you can see this will change over the coming months.

July August September October
Monthly Employer Costs £0 £69 £207 £345
As % Gross Employment Costs 0% 5% 14% 23%

Closure to New Entrants From July:

The scheme will close to new entrants from 30 June 2020. From this point onward, employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June.

This means that the final date by which an employer can furlough an employee for the first time will be the 9 June, in order for the current three-week furlough period to be completed by 30 June.

Employers will have until 31 July to make any claims in respect of the period to 30 June.

Further Points to Note:

  • A new minimum reporting period of one week will apply from 1 August 2020. More frequent claims will not be accepted, but the reporting period can be longer.
  • Previously, you were able to submit a claim for multiple months, however, from 1 July to avoid any confusion with the upcoming changes, you will only be able to submit a claim for a period of one month.
  • The general premise of the furlough scheme is not changing, any furloughed employee will still need to be paid 80% of their salary or £2,500 per month, whichever is lower. It is merely the Government contribution to the 80% of reference salary that is being reduced as the scheme progresses.
  • The new calculation will apply from 1 July to factor in the cost of hours worked to hours furloughed ratio.
  • Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
  • For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
  • A new maximum limit to the number of staff who can be included on a claim will be introduced. This will be based on the maximum number of staff included in a single claim under CJRS V1.
  • CJRS V2 will end on 31 October 2020.

As always, if you would like any further information on your options or any of the other changes announced, please contact your usual Williamson & Croft contact. Otherwise, feel free to contact our offices on 0161 399 0121 / 0151 303 3112 or by email info@williamsoncroft.co.uk

Williamson & Croft is a market leading accountancy, advisory and tax firm with particular specialisms in property, construction, retail, digital and creative, technology and professional services.

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