The government’s Self-Employment Income Support Scheme (SEISS) will be extended, the Chancellor Rishi Sunak announced on the 29 May
Flexible Furloughing is on its way
Following the Chancellor’s announcement on Friday 29 May, the furlough scheme becomes flexible from 1 July. This means that employers can bring back their workers on a flexible, possibly part-time basis, furloughing them for the rest of each week, or leaving them completely on furlough if they are not yet open for business. However, from 1 August, the employer must start to contribute towards the cost of furloughed employees which is likely to mean an increasing wage bill with income still low or non-existent.
The Chancellor also announced one further grant payment to help the self-employed. A single payment of 70% of the average profits over the past three years will be paid in August – up to a maximum of £6,570 (the first was a maximum of £7,500). The calculations for this will be the same as for the first payment, and grants will be based on the calculations already carried out by HMRC. Further information on the second grant will be available on the Gov.uk website on 12 June.
Important note: the latest date at which the first SEISS claim can be made is 13 July 2020. Claims cannot be made after this date for the first three months of the furlough period.
The Coronavirus Job Retention Scheme (CJRS) will come to a complete stop on 31 October, meaning the end of all government support for employers, which has lasted for 8 months. The existing scheme will close on 30 June and the new scheme starts on 1 July. From this date, no new employees will be allowed onto the scheme and employers will only be able to furlough employees that they have furloughed for a full three-week period before 30 June. As the current minimum time for furloughing staff is 3 weeks, this means that the latest date for furloughing new staff will be 10 June – no one can be added to the furloughed list from this date.
Additional guidance, and information on how to make flexible claims under the CJRS, will be available from 12 June on the Gov.uk website.
For the new scheme, the minimum furlough time is one week and the employer will decide on the hours and shift patterns to be worked. If there is no work then they can remain on furlough full time for the period of the scheme. Claims can be made at any time (e.g. weekly or monthly) but, as now, claim periods cannot overlap.
The amounts to be paid by both government and the employer from now until the end of October are as follows:
June and July – the scheme payments remain as they are now – the Government will pay 80% of the wage as they have done since 1 March. However during July, as flexible furloughing becomes possible, the amount of wage that can be claimed back will only be 80% of the furloughed time.
August – the Government will pay the full 80% furlough wage but the employer must now pay the Employer’s NIC and Pension contributions themselves. NICs could be covered by the Employer’s Allowance but the pension must be found and paid. Where individual pay falls below the relevant threshold, no NICs or pensions will be due anyway so for minimum hourly paid workers this may not become relevant.
September – the Government will pay 70% of the furloughed wage and the employer will have to find the extra 10% (plus the NICs and pension contributions). The maximum amount paid via the furlough scheme will drop from £2,500 per month down to £2,187.50 pro-rated to the number of hours furloughed.
October – the Government will pay 60% of wages for furloughed staff and the employer the remaining 20%. The maximum furlough payment will drop to £1,875 per month, again pro-rated to the number of hours furloughed.
From 1 November – the scheme has now finished; employers are fully responsible for paying workers and all Government grants cease.
So from 1 July, the calculation of pay is very likely to become a mixed bag, similar in a way to that carried out during March when some weeks were worked fully and some furloughed. This time however the pay calculations could become more complex. Consider a straightforward example:
An employee is on a weekly wage of £350 (35 hours at £10 per hour). To keep the calculations simple, assume this is the wage since March 2019 and is the figure on which the original furlough was based. Their furlough wage since March 2020 has been 80% of £350 = £280 per week (or £8 per hour).
From 1 July you can afford to bring them back for 2 days per week and leave them on furlough for the remaining 3 days at 80% of their furloughed hourly wage.
Their total gross wage will be calculated as follows:
Worked wage = 2 days x 7 hours x £10 = £140
Furloughed wage = 3 days x 7 hours x £8 = £168
Total wage = £308
Note: for payroll and bookkeeping purposes you should show the two rates separately on the payslip and in the accounts.
Employers NICs (from table A) would be £19.25
Employer’s pension contribution would be calculated as normal
If they are still on full furlough the calculation becomes simpler with the furloughed wage being £280 as before and a different amount for NIC and pension.
During June and July, the employer will only pay for the worked hours (£140). The CJRS grant will cover the £168 furloughed wage at 80% plus the Employer’s NICs and Pension.
During August, the employer must start to pay the NICs and Pension costs. Hence now the Government will only pay for the furloughed wage which is £168.
During September, the figures change as the CJRS percentage drops. The wage calculation will remain the same as the employee has to be furloughed at 80%. However, the government will only contribute furlough claims at 70% so the amount claimed back will reduce to
3 days x 7 hours x £7 per hour = £147 with the employer covering the ‘missing’ 10% of the furloughed wage calculation 3 days x 7 hours x £1 = £21 on top of the worked hours, NICs and Pension.
In October, the CJRS grant drops again to 60% and the amount claimed back will be
3 days x 7 hours x £6 = 126, again with the employer picking up the missing 20% of the furloughed wage.
And we thought March was complicated!
As far as it is understood at present if the employee is on minimum wage then any worked hours must be paid at the current 20/21 rate but the furloughed rate is based on last year’s minimum wage levels – this may become clearer though as the guidance develops.
For those of you involved in Early Year’s provision (and everyone on my Early Years Focus Group) – I suggest we convene another meeting!
The easy bit is that we have already calculated the furlough wage (be it standard, hourly paid, variable paid and zero hours contracts) so those figures should remain unchanged – it is the split between worked and furloughed time that is the new part of the calculation and the further split as the percentage to be claimed back changes in September.
We will be discussing this further in this week’s ‘Thank Furlough it’s Friday’ on ICBTV (5th June) and please be aware that this information is valid as of today and may change as further information develops and the guidance on Gov.uk is amended.
Welcome to the fun world of flexible furloughing!