Chancellor gives hope to small firms and self-employed with flexible furlough and income support

  • 29 May 2020

The Chancellor, Rishi Sunak, has announced more flexibility as part of the job retention scheme and the income support scheme

The Self-Employment Income Support Scheme will be extended - the grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.

Also, from 1 July 2020, businesses will be given the flexibility to bring furloughed employees back part time. This is a month earlier than previously announced to help support people back to work. Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them - and will be responsible for paying their wages while in work.

From August 2020, the level of government grant provided through the job retention scheme will be slowly tapered to reflect that people will be returning to work. That means that for June and July the government will continue to pay 80% of people’s salaries. In the following months, businesses will be asked to contribute a modest share, but crucially individuals will continue to receive that 80% of salary covering the time they are unable to work.

 

The scheme updates mean that the following will apply for the period people are furloughed:

  • June and July: The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.
  • August: The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
  • September: The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.
  • October: The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.

Responding to new details about future plans for the job retention scheme (JRS) and self-employment income support scheme (SEISS), Federation of Small Businesses National Chairman Mike Cherry said: “The Chancellor has today given thousands of small business owners the certainty they need to plan for the coming months. We’ve always said that extending the JRS and making it more flexible would be key to getting the economy back on its feet.

“By providing employers with the adaptability they’ll require as businesses adjust to a new normal, and bringing forward the flexible furlough launch date, the government is giving hope to small firms right across the UK. Delivery is now key, and new operational systems should be as streamlined as possible.

 

“Our five million-strong self-employed community will be greatly relieved to know that the income cliff-edge they were facing in two days’ time has now been removed. The hope is that more and more sole traders will be able to return to work safely as restrictions are eased. Policymakers have rightly recognised that self-employed business owners working in a lot of sectors – not least hair & beauty, events and travel – will be massively impacted by the current downturn for many weeks to come.

“More should now be done to help the newly self-employed. Those who have filed a 2019-20 tax return should be in scope for this fresh support, not just those who submitted for the 2018-19 year.

“There are still those, including limited company directors, who are excluded from the SEISS. We have this week written to the Small Business Minister with a range of new policy proposals aimed at helping this group off the back of a hugely challenging period. We look forward to his response.

 

“More widely, as we look towards recovery, the government should help small business owners who do the right thing. Many will struggle with the costs of putting safety measures in place after weeks of little or no revenue – back to work vouchers are one route through which to assist those in this position.

“The Treasury should also look again at statutory sick pay terms. Some of those who suffer from the coronavirus will face additional absences because of secondary health conditions further down the line. We hope the government will consider a full statutory sick pay rebate for those with under 50 staff covering multiple absences until the end of the year.”

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