Furlough and Self-Employment Income Support Schemes Updates

Posted: May 25, 2021

Although there are already signs of economic recovery across the UK, many businesses may still need to rely on the furlough scheme for some time and so they must be prepared for these important changes.

Coronavirus Job Retention Scheme

The Coronavirus Job Retention Scheme, commonly known as the furlough scheme, had been due to finish on 30 April 2021.  However, due to the continued impact of the coronavirus pandemic and the extended UK lockdown (which is in the process of being lifted), the Government has extended the scheme for a further five months from 1 May 2021 until 30 September 20211.

New employees who have not previously been eligible for furlough can be furloughed for the first time from 1 May 2021 onwards, if they were included in a PAYE Real Time Information submission to HMRC by 2 March 2021.

During May and June 2021, employers will not be required to make contributions to the employee’s salary, beyond the normal payment of national insurance and pension contributions.  Employees will continue to receive 80% of their current salary while on furlough, which is capped at £2,500.       

As of 1 July 2021, the Government’s contribution is changing to 70% and will be capped at £2,187.50. Employers will be required to make a 10% contribution to make up the 80% total up to a cap of £2,500 (as well as continuing to pay employer’s national insurance contributions and pension contributions).

From 1 August 2021 until 30 September 2021, the Government will pay 60% of wages up to a cap of £1,875 with employers having to pay an additional 20% to top up the 80% total up to a cap of £2,500 (again, continuing to pay employer’s national insurance contributions and pension contributions).

Self-Employment Income Support Scheme (SEISS)

Any claims for the fourth grant of the SEISS scheme need to be made on or before 1 June 2021.

To be eligible, the self-employed must have traded in both 2019 to 2020 and 2020 to 2021 tax years and have submitted their tax return on or before 2 March 2021.  They must also reasonably believe that they will suffer a significant reduction in trading profits, due to reduced business activity, capacity, demand or inability to trade due to coronavirus between 1 February 2021 and 30 April 2021.  Evidence also needs to be retained to demonstrate such impact. 

The fourth grant is calculated at 80% of 3 months’ average trading profits. It will be paid out in a single instalment, capped at £7,500 in total and will depend on average trading profits.

There is a fifth, and supposedly final, grant for the self-employed.  The grants will apply to the period from May 2021 to September 2021 and further information will be announced in due course. 

Increase in Employment Tribunal Claims

While the latest announcements will be welcomed by employers and also the self-employed, the impact that the coronavirus pandemic has had on the economy has, unsurprisingly, resulted in increased employment claims.  From September 2020 to December 2020, claims rose by 25%. 

Interestingly, claims in age discrimination have seen the largest increase, from 208 in September 2020 to 1,166 in October 2020.  This may be reflective of the pandemic’s effect on older and younger workers, who have been hit hard by redundancies and furlough.

The extension of furlough may result in a plateau of claims for now, however, claims are expected to spike once the furlough scheme finally comes to an end.

If you would like assistance regarding the furlough scheme or the impact of this coming to an end, particularly now that the furlough scheme cannot be used to pay notice monies, please contact us.

1 Changes to the Coronavirus Job Retention Scheme from July 2021

Louise Jordan, Trainee Solicitor, Simkins LLP

Victoria Willson, Partner, Simkins LLP