Changes to furlough

A total of 9.5 million jobs have been furloughed at a cost of £31.7bn, according to the latest statistics from HMRC. This represents a quarter of the entire UK workforce.

The scheme, officially known as the Coronavirus Job Retention Scheme (CJRS) will come to an end on 31 October and in the run up to it being wound down, a number of changes are taking place.

Currently, the government pays 80% of an employee’s salary up to £2,500 a month plus National Insurance (NI) and pension contributions.

From tomorrow (1 August), this will continue but employers will have to pay NI and pension contributions.

So, for now and throughout the month of August, there is no change to an employee’s pay.

Kate Palmer, associate director of advisory at Peninsula, explained: “August marks the start of the employer contributions to wage costs. In August, the employer will have to pay the employer’s NI and pension contributions but will still be able to receive 80% of the employee’s pay to a maximum of £2,500 per month, so no contribution to their actual wages is needed.”

It’s from September when changes to the CJRS will really impact employers, though employees shouldn’t see any change when it comes to pay.

Palmer said: “In September, the CJRS will only provide 70% of wages to a maximum of £2,187.50 per month. In October, it will provide 60% of wages to a maximum of £1,875 per month.

“Regardless of the reduction in the amount that the employer can claim from the CJRS, the employee must still get at least 80% of their wages, capped at £2,500 per month. This means that the employer will have to make up the difference between what it can claim from the CJRS and 80% to a maximum of £2,500 per month.

“For September, this means that they will need to pay 10% to a maximum of £312.50 per month as well as paying the NI and pension contribution, and in October the employer will have to pay 20% to a maximum of £625 per month and cover the employer national insurance and pension contributions.”

With redundancies on the horizon, particularly as struggling businesses will need to pick up more of their furloughed employees’ wage costs, the government announced a one-off Job Retention Bonus of £1,000 to UK employers for every eligible furloughed employee they bring back to work and are still employed at the end of January 2021. Employers will be able to claim the bonus in February 2021.

Self-employment Income Support Scheme

Up until 19 July, 2.7 million workers claimed under the Self-employment Income Support Scheme (SEISS), with the total value of claims standing at £7.8bn.

SEISS allows eligible applicants to receive a taxable grant worth 80% of average monthly profits based on the last three years of tax returns, up to a maximum of £2,500 a month, so £7,500 in total.

This first grant could be claimed up until Monday 13 July.

A second and final grant will be available for self-employed workers from August. In order to be eligible, businesses need to prove they’ve been adversely affected by coronavirus on or after 14 July 2020.

It’s a lesser amount, worth 70% of people’s average monthly trading profits, capped at £2,190 per month so £6,570 in total.

You can make a claim for the second grant even if you didn’t make a claim for the first grant.

You should have been contacted by HMRC if you’re eligible for the scheme. But if you haven’t heard from HMRC, you can find out if you’re eligible using this online tool.