How does the UK Chancellor’s budget impact employers

3rd March 2021

UK Chancellor Rishi Sunak promised his government’s 2021 budget “meets the moment” and delivers the “full measure of our fiscal firepower’ to continue to protect jobs and employers.  The Chancellor began his budget speech by announcing that the Office for Budget Responsibility has revised its unemployment forecast downwards from 11.9% to 6.5%, a decrease which Sunak credits to his government’s financial support for the labour market throughout the pandemic.

In addition to billions more in support for the self-employed, Sunak announced that the Coronavirus Job Retention Scheme (CJRS), known as the furlough scheme, will be extended to September 2021. However, there are some changes to the amounts available to employers and to the self-employed through the respective schemes.

The extended CJRS

The CJRS was previously due to close at the end of April 2021 but the Chancellor’s budget announcement today confirmed that the scheme will continue until the end of September 2021.

Until the end of June 2021, employers can still claim 80 percent of wages for hours not worked by furloughed employees, up to a capped amount of £2,500 a month per employee excluding pensions & NIC contributions which are to be paid by employers. After the end of June 2021, the amount of wages which can be claimed under the scheme will reduce.

From 1 July 2021, businesses will be able to claim 70 percent of wages of unworked hours from the scheme and will have to contribute an additional 10 percent of wages themselves so that workers who are furloughed continue to receive at least 80% of their usual wages.

From 1 August 2021 to the end of the scheme on 30 September 2021, the Government scheme will provide 60 percent of wages for unworked hours, with companies contributing the extra 20 percent.

Employers may, of course, choose to top up their workers’ wages to 100 percent of wages for unworked hours and must continue to make contributions to pension scheme and to pay National Insurance Contributions.

The scheme remains open to all employers with a UK bank account and UK PAYE schemes and businesses do not need to have previously claimed for an employee in order to benefit from the extended scheme.

The furlough scheme is estimated to have cost the Treasury a sum total of £53.8 billion so far and the extension has been estimated to cost up to £6bn per month in additional expense.

Will the scheme remain open for flexible furlough?

In line with the current CJRS scheme rules, employers may continue to furlough flexibly. This means that employers will be able to use the scheme for employees for any amount of time and shift pattern, including furloughing employees full-time.  This also allows employers to bring workers back as needed when work becomes available.

Which employees can be claimed for under the scheme?

The scheme continues to be available for employees on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed and grants under the scheme are not counted as ‘access to public funds’, so businesses can furlough employees on all categories of visa.

Employers are advised check the government guidance as to which employees you can put on furlough which continues to be updated regularly by the government to take into account changes to the scheme. In particular, since 1 December 2020, businesses have not been able to claim for any days during which a furloughed employee was serving a contractual or statutory notice period for the employer (this includes people serving notice due to retirement or their resignation). If an employee subsequently starts a contractual or statutory notice period on a day covered by a previously submitted claim, employers will need to make an adjustment to their CJRS claim.

See the additional guidance on different types of employees and non-employees you can claim for which sets out more information on furloughing directors, certain contractors and agency workers subject to their being paid through the PAYE scheme.  In some cases, these individuals will only be eligible post 1 July 2021 if the employer has already submitted a claim for them for at least 3 weeks between 1 March 2021 and 30 June 2021.

Self-employment income support  extended

The Chancellor announced the Self-employment Income Support Scheme (SEISS) has also been extended to cover lost earnings.   A fourth grant covering the months of February 2021 to April 2020 will be available along with a fifth and final grant available for the period of May 2021 onwards.

The Chancellor announced the amounts available under the extended SEISS will target those hardest hit.  Self-employed people whose turnover has fallen by 30% or more will receive a grant of 80% of monthly trading profits covered, up to £7,500 in total.  Those self-employed people whose turnover has fallen by less than 30% will receive a 30% grant.

The SEISS will now be open to 600,000 more self-employed people who became self-employed in the 2019-20 tax year for the first time.  This means that provided a self-employed person filed their tax return by no later than midnight yesterday, they will be eligible for the fourth and fifth grants.

A system for claims will open in late July 2021.

What other jobs-related measures were announced by the Chancellor?

Government grants and an extended business rate holiday worth £6 billion were confirmed for businesses operating in the retail, hospitality, accommodation, leisure and personal care sectors.

Non-essential retail businesses due to open on 12 April 2021 when restrictions relax will be eligible to receive grants of up to £6,000 per premises.  Hospitality and leisure businesses which are due to open later will be eligible for grants of up to £18,000.

The business rate holiday for the retail and hospitality sector will continue until the end of June 2021. For the rest of the financial year, business rates will be reduced by two thirds, up to maximum of £2 million for each business that remains closed and a separate cap for those businesses that can re-open.

The Chancellor also announced that incentive grants for new apprenticeships will double to £3,000 for each adult apprentice and 40,000 more traineeships will be created by a funding boost of £126 million.

The National Minimum Wage is also set to increase to £8.91 an hour from Apri1 2021.

Where can I find further advice and support?

Should you require any assistance with your employment arrangements during the Covid-19 pandemic, please do not hesitate to contact the co-head partners of our employment department.  Ewan Keen can be reached at 020 3206 2724 or Ewan.Keen@SMB.London or Tamara Ludlow can be reached at 020 3206 2739 or Tamara.Ludlow@SMB.London.