Plans for the next phase of the ongoing furlough initiative have been confirmed, as have proposals to extend the Self-Employment Income Support Scheme.
Recognising that businesses have been through an “incredibly difficult time”, the Chancellor started his speech by revealing how the slow introduction of the contribution will work.
The furlough scheme will continue in its current guise, paying 80% of employees’ wages up to £2,500 with no employer contribution. But from August employers’ will be expected to pay a “modest contribution”.
At first, the Chancellor explained, employers will only have to cover national insurance and employer contributions, which he said accounts for 5% of total employment costs.
The main change comes into force from September when the government furlough contribution drops from 80% to 70%, with the employer having to pick up the 10%. Sunak reasoned that from this point, “employers will have had the opportunity to make any necessary changes to their workplaces and business practices”.
Then in October, the final stage of the furlough scheme, employers will have to pay 20%, with the government’s contribution shrinking to 60%. After this, the government contributions will finish, and the scheme will come to an end.
Although employers will have to prepare for the inevitable end of the scheme, the Chancellor has listened to large and small businesses’ request for a more flexible furlough.
As Sunak announced earlier this month, a new element of furlough 2.0 is to enable workers to return part-time whilst still being under the scheme – and this aspect will arrive one month earlier than originally planned, from 1 July.
To illustrate how the scheme will work, Sunak used the example of how a furloughed worker could return for two days and would be paid as normal, while the government would cover the other three days.
However, Sunak added that the introduction of part-time furloughing means the scheme will have to close to new entrants from the end of June, as the flexible aspect is restricted to current furloughed workers. This gives employers only until 10 June to add any new employees to the scheme.
Freelancers and self-employed workers who had urged the Chancellor to extend the SEISS in line with furlough scheme were handed a lifeline at the end of Sunak’s speech, with news of a final grant.
The self-employed scheme will open for applications in August, but with the grant reduced to 70% of their average monthly trading profits. As with the SEISS scheme, the money will be paid in a single instalment covering three months’ average monthly profits up to £6,570, down from the £7,500 cap of the first grant.
The government has not changed the eligibility criteria for the second grant. As with the first version, individuals will have to confirm that they’ve been adversely affected by Covid-19. However, a self-employed worker does not have to have claimed the first SEISS grant in order to be eligible for this final handout.
The self-employed income support scheme has so far supported 2.3m people with claims worth £6.8bn. The first grant is still open for applications, but self-employed workers have until 13 July to apply.
Chancellor Rishi 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 reopen our country and kick-start 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.”
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