A detailed look into the Job Retention Scheme changes
The Chancellor, Rishi Sunak recently announced the upcoming changes to the Job Retention Scheme (JRS) and also delved into the plans for the support to be gradually withdrawn over the next five months.
The scheme was introduced to reduce the number of layoffs during the COVID-19 pandemic and with 8.4 million workers currently on the scheme, it’s been invaluable to many businesses.
In fact, one million employers have taken advantage of the scheme that provides furloughed workers 80% of their normal wage up to £2,500 per month.
Sunak stated, “We stood behind Britain’s businesses and workers as we came into the crisis and we stand behind them as we come through the other side.”
“Now as we begin to reopen our country and kickstart our economy, the scheme will adjust to ensure those who are able to work can do so.”
As plans for easing lockdown quickly approach, the following changes and announcements have been made regarding the scheme.
1) Part-time furloughing
From 1 July 2020, businesses using the scheme will have the flexibility to bring previously furloughed employees back to work part-time.
The Government will continue to pay 80% of wages for any of the normal hours they do not work up until the end of August.
This flexibility is being introduced a month earlier than previously announced to help people get back to work.
Employers will decide the hours and shift patterns their employees will work on their return and will be responsible for paying their wages in full while working.
This means that employees can work as much or as little as the business needs, with no minimum time that they can furlough staff for.
2) Employer contributions
The Government grant provided through the Job Retention Scheme will slowly start to be tapered.
June and July
The Government will pay 80% of wages to a cap of £2,500 as well as employer National Insurance (ER NICs) and pension contributions for the hours employees are contracted to work but have been furloughed for.
The Government will continue to pay 80% of wages up to a cap of £2,500 but employers will have to pay ER NICs and pension contributions.
The support will drop to 70% with a cap of up to £2,187.50 for the hours employees don’t work and employers will pay ER NICs, pension contributions and 10% of wages to make up 80% of the total with the original cap of £2,500.
The Government will once again drop their support to 60% with a cap of £1,875 for the hours employees don’t work.
Employers will then pay ER NICs, pension contributions and 20% of the wages to make up 80% of the total up to a cap of £2,500.
Note for smaller employers
Many smaller employers have some or all of their employer NIC bills covered by the Employment Allowance so they will not be significantly impacted by that part of the taper.
3) Important dates
Please note that the scheme will be closed to new entrants from 30 June 2020.
From that point onwards, employers will only be able to furlough employees that they have furloughed for a full three-week period before the deadline.
This means that the final date employers can furlough an employee for the first time will be 10 June 2020 for the three-week furlough period to be completed.
Further guidance and support
Further information and support from the Government on how to calculate claims with the added flexibility will be available by 12 June 2020.
IRIS Payroll customers have nothing to worry about as our solutions will accommodate all the changes to help them throughout this period.