Firms remain at risk
Holyrood’s road map ‘out of line’ with Treasury scheme
Liz Cameron: ‘misalignment will affect crucial areas of the economy’ (pic: Terry Murden)
A business leader in Scotland says thousands of firms north of the border are at increased risk because the government’s route map back to work is out of alignment with the Treasury’s newly tapered support scheme.
Chancellor Rishi Sunak today sought to reassure businesses, including the self-employed, that the government will continue to provide further help as they move out of lockdown.
Support for the self-employed will be extended beyond Sunday’s feared cut off, while companies with staff on furlough will be encouraged to introduce part-time working a month earlier than expected, and from September the level of subsidy will be reduced.
Business groups broadly welcomed the extension of both schemes, saying they would provide companies of all sizes with a degree of certainty and the required support needed as they begin the slow return to work.
However, Liz Cameron of the Scottish Chambers of Commerce, said: “The big challenge for Scottish businesses is that the UK government’s new tapered approach to the furlough scheme is not aligned with the Scottish Government’s roadmap out of lockdown.
“This misalignment will affect crucial areas of the economy such as tourism which are forced to close for longer.
“Before tapering hits, we need to ensure all sectors of our economy are able to generate trade so they are able to pay employees. Currently there is still a lack of clarity for businesses in Scotland over when they can re-open. We urge the chancellor to adopt measures to ensure that businesses facing ruin as the furlough scheme tapers aren’t forced to fall at the last hurdle.’’
The Chancellor announced that those eligible under the Self-Employment Income Support Scheme (SEISS), which has so far seen 2.3 million claims worth £6.8 billion will be able to claim a second and final grant in August.
Rishi Sunak: a lifeline for millions
The grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
From 1 July, one million businesses which used the Coronavirus Job Retention Scheme to furlough 8.4 million staff, will begin to bring these employees back part-time.
The Treasury says this is a month earlier than previously announced “to help support people back to work”. Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them – and will be responsible for paying their wages while in work.
The level of government grant provided through the job retention scheme will be slowly tapered to reflect that people will be returning to work.
This means that for June and July the Government will continue to pay 80% of people’s salaries. In the following months, businesses will be asked to contribute, but it does mean individuals will continue to receive 80% of salary covering the time they are unable to work. The level of support will fall to 70% in September and 60% in October.
The scheme updates mean that the following will apply for the period people are furloughed:
- June and July: The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.
- August: The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
- September: The government will pay 70% of wages up to a cap of £2,190. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.
- October: The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
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.
“We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.
“Now, as we begin to re-open our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.”
Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked. Employees who believe they are not getting their 80% share can also report any concerns to the HMRC fraud hotline. HMRC will not hesitate to take action against those found to be abusing the scheme.
Federation of Small Businesses national chairman Mike Cherry said: “The Chancellor has today given thousands of small business owners the certainty they need to plan for the coming months.
“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.
“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.
“More should now be done to help the newly self-employed. Those who have filed a 2019-20 tax return should be in scope for this fresh support, not just those who submitted for the 2018-19 year.
“There are still those, including limited company directors, who are excluded from the SEISS.”
Adam Marshall: careful balance (pic: Terry Murden)
British Chambers of Commerce director General Adam Marshall said the Chancellor has “struck a careful balance” that will help many firms bring furloughed staff back to work flexibly over the coming months, though he felt that closing the scheme to new applicants “feels premature” and risk undermining some of the work done.
“The gradual reduction in furlough contributions from the Treasury will give businesses additional time to rebuild their income streams and cash flows, and the decision to give businesses maximum flexibility to bring people back part-time will be appreciated,” he said
“The extension of support for the self-employed will come as welcome relief for those who have seen their livelihoods impacted by the virus. It is right that this group continues to receive similar levels of support to those on PAYE.”
Dame Carolyn Fairbairn, CBI Director-General, said: “Introducing part-time furloughing as more stores and factories start to open will help employees to return to work gradually and safely. Many more businesses will feel supported during this vital restart phase.
“Firms understand the scheme must close to new entrants at some point and that those using it in future will need to make a contribution to help manage the costs.
“However, previously viable firms not able to open until later, particularly in leisure, hospitality and the creative industries, may need further assistance in the coming months.”
How the schemes work:
- Individuals can continue to apply for the first SEISS grant until 13 July. Under the first grant, eligible individuals can claim a taxable grant worth 80% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £7,500 in total. Those eligible have the money paid into their bank account within six working days of completing a claim.
- Applications for the second grant will open in August. Individuals will be able to claim a second taxable grant worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
- The eligibility criteria are the same for both grants, and individuals will need to confirm that their business has been adversely affected by coronavirus. An individual does not need to have claimed the first grant to receive the second grant: for example, they may only have been adversely affected by COVID-19 in this later phase. Further guidance on the second grant will be published on Friday 12 June.
- Around 40% of employers have not made a claim for employer NICs costs or employer pension contributions and so will be unaffected by the change in August if their employee’s employment patterns do not change
- Many smaller employers have some or all of their employer NIC bills covered by the Employment Allowance so will not be significantly impacted.
- Around 25% of CJRS monthly claims are below the thresholds where employer NICs and automatic enrolment pension contributions are due, and so no employer contribution would be expected for these payments to furloughed employees in August.
- To enable the introduction of part time furloughing, and support those already furloughed back to work, claims from July onwards will be restricted to employers currently using the scheme and previously furloughed employees. The scheme will close to new entrants on 30 June, with the last three-week furloughs before that point commencing on 10 June.
- From 1 July, employers will be able to agree any working arrangements with previously furloughed employees.
- When claiming the CJRS grant for furloughed hours; employers will need to report and claim for a minimum period of a week, for grants to be calculated accurately across working patterns.
- The updated SEISS and CJRS schemes will continue to operate UK-wide to the timings set out above.
- If an average claim lasted 8 months, the total cost of employer contributions would represent around 5% of the gross employment costs an employer would have incurred had the employee not been furloughed.