Furlough, Grant and Bonus scheme changes (Oct 2020)
Ready for some new acronyms to brighten your day!? We’ve sifted through the various articles and government documents for you and there’s a few tweaks and schemes we need to share with you. As ever, it was a Friday afternoon announcement as they obviously like to give us something to do over the weekend!
We are covering these areas in this blog post
- A NEW furlough scheme, Furlough 3.0, which is for businesses who are legally required to close as a direct result of Coronavirus restrictions. This new scheme offers a lot more support (than the recent incarnations) and is eligible to businesses who took on employees on or before 23rd October 2020.
- An increase to the rolling cash grant payments (Local Restrictions Support Grant LRSG) recently announced for businesses who have to shut due to local or national lockdowns, to help them pay for fixed costs. Includes a welcome option for all businesses, such as nightclubs, bowling alleys etc who have been shut the whole time and who were forced to close on or after 9th September 2020. This will not be backdated however for the months between March and September.
- More detail on Jobs Retention Bonus (JRB) scheme and what you need to do to be eligible for £1000.
Please note that this new Furlough 3.0 is a new scheme (announced Friday 9th October 2020) and is not the previously announced Jobs Support Scheme which we explained in 16 steps here.
The new scheme is designed to sit alongside the existing Jobs Support Scheme (JSS) and the Job Retention Bonus. (JRB), which we will come back to below.
- To be eligible, the employee must be furloughed for periods of at least 7 days at a time, during which they will receive 66% of their wages.
- It will run from 30th November til 31st March.
- Employees are only eligible for this support if they were on the payroll of the employer an included on an RTI return before 23 September 2020. So the previous furlough requirement of being employed on or before 28th Feb is no longer relevant for the new scheme.
- The portal will open on December 1st and so you will need to pay the employee at the end of November and be reimbursed. This is so HMRC can see proof that the wages have been paid, by submitting an RTI return, before they will provide a refund of those costs.
- The maximum amount the government will pay per employee a month is £2,100. The governments contribution will be for the employee solely and not contributing to the NI and pension payments from the employer.
- The employer will have to pay the employee’s wage upfront plus any employer’s NIC and the minimum employer’s pension contributions on those wages, however, the government thinks that many employees will be under the NI threshold. See below for the maths on this*
- The employee will be effectively forgoing a third of their wages. And they will not be working at all for the business which is furloughing them. The business will have closed. But they can work for another business during this time.
- Contracts will need to be amended yet again.
*The government expects that around half the employees covered by Furlough 3.0 (also confusingly called the extended Jobs Support Scheme) will not be paid enough to trigger an employer NIC liability, or minimum employer pension contributions to a workplace pension.
Employer’s NIC kicks in at £732 per month (£8,784 per year), so an employee who normally earns more than £13,176 per year will create a national insurance liability for the employer when furloughed under the expanded JSS on two thirds of pay.
Workplace pension contributions will depend on whether the individual has been auto-enrolled in the pension scheme or has opted out. Those aged between 22 and state pension age have to be auto-enrolled if they earn £10,000 of more per year. Once in the pension scheme the extent of the employer’s contributions will depend on the rules of the scheme, but a minimum of 3% of the employee’s earnings between £6,240 and £50,000 per year will be typical.
Please click here for the government’s low down on the restricted furlough 3.0 scheme
LOCAL RESTRICTIONS SUPPORT GRANT (LRSG)
NEW CASH GRANTS – CHANGES TO THE PREVIOUS SCHEME DETAILS
This is for businesses who have to shut due to local or national lockdowns, to help them pay for fixed costs.
I won’t confuse you by going into the previous scheme outline as it’s now not relevant, but it only relates to businesses who have been forced to close due to national restrictions or those affected by local lockdowns.
The payments are scaled as explained below.
- Small businesses with a rateable value of or below £15,000 can now claim £1,300 per month; medium sized businesses with a rateable value between £15,000 and £51,000 can claim £2,000 per month; and larger businesses can claim £3,000.
- The government is also extending the scheme to include businesses which have been forced to close on a national rather than a local basis.
The business may be eligible if it
- occupies property on which it pays business rates
- is in a local lockdown area and has been required to close because of the formal publication of local restrictions guidance that resulted in a first full day of closure on or after 9 September. This funding is not retrospective
- has been required to close for at least 3 weeks because of the lockdown
- has been unable to provide its usual in-person customer service from its premises. For example this could include non-essential retail, personal services or cafes/restaurants that operate primarily as an in-person venue, but which have been forced to close those services and provide a takeaway-only service instead.
- Eligible businesses will get one grant for each property liable for business rates within the lockdown zone.
- Businesses that are required to close but do not pay business rates may be eligible for funding at the discretion of the local council, as may businesses not required to close but which are severely impacted.
Here are the main exclusions:
- businesses which are able to continue to operate during the lockdown because they do not depend on providing direct in-person services from their premises
- businesses that have chosen to close, but have not been required to close as part of a local lockdown
- businesses that are still subject to national closures such as nightclubs
- businesses that have reached the state aid limit (which is 200,000 euros over three years)
JOB RETENTION BONUS (JRB)
As the Chancellor announced a few months ago, businesses that brought back furloughed employees are also eligible to receive a £1,000 job retention bonus.
For those businesses with an eye on this £1,000 bonus, there’s some detail you need to know.
- The employee needs to have been continuously employed by you and been on the previous Coronavirus Job Retention Scheme (CJRS/Furlough), so employed on or before 28th Feb 2020.
- You need to have paid them each month for the three months immediately prior to the application for the bonus. An employee must have received taxable pay in each of the three tax months:
- 6 November – 5 December
- 6 December – 5 January
- 6 January – 5 February
- And the minimum threshold for income is £1,560, spread across the three months. It’s not ok to have paid them in November and December but not in January (even if you are in excess of the minimum income threshold). So hang in there if you can and spread the work hours out.
- The window for applications is quite tight, between 15th Feb and 31st March.
We will be sending out further details nearer the time.
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