The Chancellor of the Exchequer, Rishi Sunak, has announced the level of the employers contribution in relation to the job retention scheme at the daily press briefing on the 29th May 2020. The rates are somewhat different to those suggested by The Times in a recent article, which indicated that the employers contribution would be somewhere between 20%-30% of furlough wages.
The Coronavirus Job Retention Scheme
Under the coronavirus job retention scheme, an employee is ‘furloughed‘, which means that whilst the employee is not working, they remain on the company’s books to be brought back when required. Moreover, the Government provides employers with a grant under which 80% of furloughed employees’ wages are paid, up to a maximum of £2,500.00 per employee per month. The scheme will run from the 1st March 2020, up to the 31st October 2020, but with employers starting to shares the costs from the 1st August 2020.
The Employers Contribution: The Rates
At the daily press briefing on the 29th May 2020, the Chancellor of the Exchequer, Rishi Sunak, announced that the job retention scheme would end on the 31st October 2020. He also stated that the employers contribution from the 1st August 2020 would be phased in, in 3 stages, as follows:-
- From the 1st August 2020, the taxpayers contribution will remain at 80% of employees wages, but employers will be required to pay the national insurance and employers pension contributions. On average, national insurance and employers pension contributions equate to approximately 5% of aggregate employment costs
- From the 1st September 2020, the taxpayers contribution will fall to 70% of employees wages, with the employers contribution set at 10% plus payment of national insurance and employers pension contributions
- The taxpayers contribution will fall to 60% from the 1st October 2020, with the employers contribution rising to 20% plus payment of national insurance and employers pension contributions
The scheme will be closed to new entrants from the 30th June 2020. By the 30th June 2020, any potential new entrant must have been furloughed for at least 3 weeks, which means that the final date an employee can be furloughed for the first time is the 10th June 2020
Employers can start bringing employees back part-time from the 1st July 2020 (brought forward from the 1st August 2020). Should they do that, then the employer would need to pay their employee 100% of their wages for those hours that they do work, whilst the grant under the job retention scheme would cover the employee for the remainder of their contracted hours at the aforementioned furlough rates.
Self-Employed Workers: Second & Final Grant
Rishi Sunak also announced that the self employed can apply for a second and final taxable grant from the 1st August 2020, worth 70% of their average monthly trading profits, paid out in a single instalment covering 3 months profits, capped at a total amount of £6,750.00.
The Employers Contribution: Reaction To The Rates Announcement
Following the announcement of the rates in relation to the employers contribution, Rishi Sunak stated that: "Our economic response to coronavirus was designed to keep people in work, protect people’s incomes, and support businesses. All to give us the best chance of recovering quickly as the economy reopens. These measures have been on a scale unmatched by any government in recent history."
As indicated above, it had been originally planned that furloughed employees would be able to return to work part time from the 1st August 2020. However, this measure has been brought forward to the 1st July 2020. The change has been welcomed. The general secretary of Trades Union Congress (TUC), Frances O’Grady, stated: "This will help employers gradually and safely bring people back to work, protect jobs and support the economy to recover."
The national chair of the Federation of Small Businesses (FSB), Mike Cherry, welcomed the Chancellors announcement in relation to the employers contribution, and the rest of the measures. He said: "The Chancellor has today given thousands of small business owners the certainty they need to plan for the coming months. We’ve always said that extending the JRS and making it more flexible would be key to getting the economy back on its feet. By providing employers with the adaptability they’ll require as businesses adjust to a new normal, and bringing forward the flexible furlough launch date, the government is giving hope to small firms right across the UK. Delivery is now key, and new operational systems should be as streamlined as possible."
