Changes to the Coronavirus Job Retention Scheme From July 2021
15 July 2021
The government recently announced changes to the Coronavirus Job Retention Scheme starting 1 July 2021.
Now, employers will have to pay more toward the cost of furloughed employees’ wages. What’s more, this contribution will increase as time passes.
Here, we’ll take a look at the impact of the government retention scheme. We’ll also examine how the furlough has changed as of 1 July. Furthermore, we’ll look at what all this has meant for small businesses.
To learn more about the changes to the coronavirus job retention scheme from 1 July, continue reading.
Overview of the Coronavirus Job Retention Scheme
COVID-19 is having a far-reaching financial impact on people and small businesses across the United Kingdom. The coronavirus scheme is designed to support UK employers who cannot maintain their current workforce because of the coronavirus.
On Budget Day 3 March 2021, the Chancellor announced that the coronavirus scheme was further extended until 30 September 2021. At that time, some employers couldn’t maintain their workforces.
Their operations faced financial trouble due to the coronavirus. The government employment scheme, however, allowed many employers to furlough employees by covering a considerable part of wages. The announcement gave small businesses an opportunity to apply for a grant to cover a portion of their usual monthly wage costs.
The HMRC reimbursement claim portal opened on 20 April 2020. The government tried to process most claims within six working days. Here, the coronavirus scheme enabled employers to make claims using the amounts in their payrolls before or during running payroll.
Scheme Changes Over Time
During the scheme, it was important for employers with current or potential furloughed staff to review scheme updates. As these changes arose, it’s was imperative to adjust your arrangements to ensure that you met the current claim criteria.
As an example, the government enacted legislation under the Coronavirus Act on 15 April. They then modified it on 20 May.
The government closed the coronavirus scheme to new entrants from 30 June 2020. It then altered it again on 11 September, which went into effect on 14 September.
These changes prevented employees from getting laid off. They were also designed to keep employee roles from becoming redundant.
However, it was important to ensure that your business aligned with these changes. Moving forward, you might find it helpful to work with a financial advisor who can help you to navigate a swiftly changing business environment.
Navigating Employment Scheme Claims
Today, it’s critical that employers pay the full amount claimed for employee wages. You must also pay associated employee tax and National Insurance contributions.
If you can’t make these payments, you must repay the money back to HMRC. Also, during the programme, you cannot enter into any agreements with workers that reduces their wages.
Employers also cannot charge administration expenses, fees or other costs in connection with employment. In instances where an employee authorised their employer to make deductions from their salary, they can continue so doing the furlough. However, these deductions cannot include administration charges.
Impact of the Scheme in the UK
In many cases, small businesses were forced into furloughing employees because of a shortage of funds. In these instances, the pandemic made it difficult for them to cover the costs of operations and pay taxes.
The idea of the government unemployment scheme was, and is, to reduce the financial burden on businesses affected by the coronavirus. Legislatures intended for the scheme to encourage small businesses to maintain their workforces while they were fighting through the coronavirus, and indeed it helped. Now, however, businesses continue to face an uncertain future—more on that in a moment.
With this in mind, the government has subsidised wages for a little more than 15 months. Much has changed since the coronavirus job retention scheme started on 20 March 2020.
Yet, this unprecedented plan remains in effect. Moreover, the government has extended it several times since its inception.
Throughout the coronavirus scheme, the programme has prevented more than 11 million coronavirus job losses at one time or another. It was especially active during the first few months.
Some businesses were more affected compared to others. For instance, pubs and restaurants were exceptionally and negatively severely affected by the coronavirus. In fact, many furloughed employees work in the hospitality industry.
In addition, many nonessential shops were affected by the lockdown. As a result, this group also claimed a considerable amount of government resources. Alternatively, large essential businesses—such as grocery chains —have already repaid the funds.
Originally, the government designed to scheme to keep people connected to their jobs after the pandemic subsides. Yet, many employees have not returned to work. Others still face unemployment due to the outfall of the pandemic.
Furlough Changes as of 1 July
Up to 30 June, employers had to furlough an employee for at least three weeks for scheme eligibility. Also, employers could only make claims for the three weeks prior to this time. Here, the eight-week government unemployment scheme covered 80% of employee wages.
This was an eight-month, two-part coronavirus scheme that continued until 31 July. It then adapted, ending on 31 October 2020. The scheme stopped accepting new entrants from 30 June.
As of 1 July 2020, employers could bring back workers previously furloughed for any amount of time. At that time, employers should have kept employee’s regular hours. You should have also recorded their actual hours for each claim period.
Also, employers must keep their employees informed. It’s also important to ask employees not to contact HMRC.
When appropriate, employers can reduce worker’s wages to 80% of their salary. Also, employers can back pay claims until 1 March 2020. However, this rule applies where employees already qualified as furloughed employees.
From 31 July, employers can bring furloughed employees back to work. Employees can work any amount of time and any pattern.
Now, the government has once again extended the scheme until 30 September 2021. However, it will only pay 70% of wages up to £2187.50. Also, employers are free to provide them with 80% of their income up to £2 500.
Here, it’s important to understand claim deadlines. For instance, you must claim June 2021 furlough days by 14 July 2021.
Things to Consider Moving Forward
From 1 July forward, an employer cannot ask an employee to work during a furlough. In addition, equality and discrimination laws will apply when employers make decisions in relation to the furlough process.
Also, employers must agree in writing that they’ve agreed to the furlough. Furthermore, employers must keep that agreement until at least 30 June 2025.
For a CJRS claim, you must disregard an employee for fulfilling duties as a trustee under an occupational pension scheme. Also, according to the HMRC scheme, employers are always subject to employment law even with changing employment terms.
What Does the End Mean for Small Businesses?
Between March 2020 and the end of 2021, the cost of the furlough may approach £66 billion. Still, it’s estimated that the furlough programme saved millions of jobs during the pandemic. According to the government, the programme has prevented an estimated 11 million job losses since its launch.
This outcome is in stark contrast to fears that arose during the beginning of the pandemic. Analysts feared that more than one in ten workers would face unemployment. However, the unemployment rate is currently less than a single-digit figure. This is a much better outcome than the previous one-in-20 jobless rate.
It looks like the coronavirus is coming to an end, but many small businesses may still face challenges. Of course, businesses that survived the pandemic are gracious—for now. However, they must overcome a new set of obstacles.
The coronavirus government unemployment scheme is winding down. Now, business owners face tighter margins.
They must also deal with staff redundancies. More importantly, the world’s business owners must face a potentially permanent change in the way that people shop.
In the background of these events, there’s also continuing uncertainty surrounding the long-term outcome of Brexit. Resultantly, small business owners will need to brace for another challenge and dig deep if they want to survive.
Get Help Managing in the New Normal
Now you know more about the changes to the coronavirus job retention scheme from 1 July. You’ve also learned that more challenges lie ahead. If you’re looking for direction for sustainable growth in the new normal, KG Accountants can help.
As of 1 July, the UK government started reducing the subsidies it provides small businesses to retain employees. At KG Accountants, we want you to know that we’re here for you and your business.
Our team of experts is ready to help you navigate the new normal. No matter what stage or size your company is in, we can guide you through the process as they make decisions about how best to manage your payroll moving forward.
Contact KG Accountants today or connect with us online to learn more about getting help managing the challenges of a new business environment.