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The Job Retention Scheme is Changing – Watch out!

Author: Joshua Ejdelbaum

Tags: Quarterly Update - August 2020

The Coronavirus Job Retention Scheme, (CJRS) which was introduced by Chancellor Rishi Sunak, has proven to be a lifesaver for many businesses. It has enabled employers to save on their staffing costs by furloughing employees, whilst ensuring that workers were able to receive up to 80% of their salary.

However, the scheme is now changing. The Government have announced that they are tapering the scheme. So how will this impact your business?

Firstly, the Government announced that furloughed employees could be brought back to work part time, and their employers could still claim CJRS for the hours not worked. This means that businesses which are opening up slowly, or at a reduced level, can start to bring back staff, without having to take on all the costs with bringing them back full-time.

However, the Government also announced that from 1st August, employees will expect to pay a higher proportion of the staffing costs – i.e. the grant provided will reduce each month. How does this look in practice?

From August, the Government pays 80% of wages up to a cap of £2,500 per month, but employers will pay Employer National Insurance Contributions and pension contributions.

From September, the Government pays 70% of wages up to a cap of £2,187.50 per month, but employers will pay Employer National Insurance Contributions and pension contributions, and top up workers’ salaries to 80% or £2,500 per month.

From October, the Government pays 60% of wages up to a cap of £1,875 per month, but employers will pay Employer National Insurance Contributions and pension contributions, and top up workers’ salaries to 80% or £2,500 per month.

So, what does this mean?

It means that the support from the Government is slowly coming to an end, and the percentage of staffing costs which the employer is responsible for is increasing. We hope that businesses will see an increase in demand to enable them to recover from the recent period to be able to meet these costs. But bearing in mind that many businesses will have taken on additional burdens, such as CBILS loans or Bounce Back Loans, which need to be repaid in the future, it means that the next few months might continue to be a challenge for many businesses.

What can you do?

The most important thing to do is to talk to your accountant. In what promises to be a turbulent period you need to make sure that you have received the right advice when it comes to CJRS and other support schemes which are available to your business. But also, you need to ensure that your medium to longer term planning is sufficient for your business to come out of this stronger and with the potential to recover and grow.