An update for agents on the furlough scheme and new Government plans

An update for agents on the furlough scheme and new Government plans

5 October 2020

At the start of the pandemic, the Government introduced the Coronavirus Job Retention Scheme to keep millions in work – now, with it ending, HomeLet looks at what is replacing it as Britain faces a second wave of coronavirus.

Early on in the coronavirus pandemic, Chancellor Rishi Sunak took dramatic action to protect jobs and shield the economy from the impact of Covid-19. He introduced the Coronavirus Job Retention Scheme, which placed millions of people on furlough. The lettings market was one of many industries impacted by the virus and lockdown period. This little-used, term had many searching for the dictionary – but the furlough scheme kept lots of people on the payroll during the worst of the pandemic, but it’s coming to a close at the end of this month, when it will be replaced by the new Job Support Scheme and other initiatives.

An unprecedented intervention

At its height, around 9.6 million people were being supported by the furlough scheme, with 1.2 million employers using it for their employees. In total, in August 2020, the value of claims under the Government’s Coronavirus Job Retention Scheme stood at £33.8 billion.

The Government also introduced the Self-Employment Income Support Scheme and billions of pounds worth of loans under the Bounce Back Loan Scheme and the Coronavirus Business Interruption Loan Scheme to support struggling businesses.

What comes next?

Facing pressure to avoid a huge raft of job losses when the furlough schemes ends, at a time when the country is facing a second spike in coronavirus infections, the Government announced the new measures it would be taking. Rather than extending the furlough scheme beyond the end of October a number of new schemes are being introduced to support job retention.

In late September, Sunak outlined his Winter Economy Plan to support the country and economy through a difficult few months. Central to this was a new Job Support Scheme and an extension of the Self-Employment Income Support Scheme, while over one million businesses would get flexibilities to help pay back loans.

The Job Support Scheme 

To support workers and businesses, a new Job Support Scheme will be introduced from November 1 to protect jobs in businesses facing lower demand over the winter months due to coronavirus.

Under the Government’s new Job Support Scheme, furloughed employees will have to return to work for at least a third (33%) of their normal hours. If they do this, they are entitled to at least 77% of their normal wage – but paying this wage must be shared between the Government and the employer.

The employer will need to pay the employee for all the hours they work. For the remaining hours that they do not work, the employer pays a third of the wages that would be due, and the Government also pays a third.

Here’s an example:

  • Paul normally works full-time for a wage of £2,000 per month. His employer furloughed him during lockdown, but is now able to take him back working a third of his hours.
  • Under the Job Support Scheme, his employer pays for all of his hours worked, totalling £666.67 per month.
  • This leaves a remainder of £1,333.33 to be paid.
  • The Government pays a third of this (£444.44) and the employer pays another third.
  • Paul’s total income for the month is therefore £1555.55. This works out as around 77% of his full-time wage.
  • The amount of the Government contribution will be capped at £697.92 per month.
The Jobs Retention Bonus

The new scheme is designed to sit alongside a Jobs Retention Bonus and, according to the Government, could be worth more than 60% of the average wages of workers who have been furloughed – and are kept on until the start of February 2021.

New guidance has been released on what employers who have furloughed staff need to know to claim the Jobs Retention Bonus from February 15 to March 31 2021. The £1,000 bonus is equal to a 20% wage subsidy for the employment costs of the average person previously furloughed.

The bonus scheme launches this month, and lasts until the end of January 2021, requiring employers to keep the staff that are brought back from furlough on payroll until at least January 2021.

Extension to the Self Employment Income Support Scheme Grant

The Government has also extended the Self Employment Income Support Scheme Grant (SEISS), with an initial taxable grant for those who are continuing to actively trade but face reduced demand due to coronavirus. The initial lump sum will cover three months’ worth of profits for the period from November to the end of January next year, worth 20% of average monthly profits, up to a total of £1,875.

An extra second grant, potentially adjusted to respond to changing circumstances, will also be available for self-employed individuals to cover the period from February 2021 to the end of April.

Protecting your business

Many of the tenants of your landlords may also be affected by the end of furlough, and the start of the new scheme. There has already been a considerable number of redundancies, across a range of industries, so the Job Support Scheme could provide a lifeline for many. One consideration for your business could be the use of rent protection services, to help protect your landlord’s rental income and your management fees. If you’re looking to protect your business call our team today to find out how we could support you.

Here’s a recap on the timeline of the Coronavirus Job Retention Scheme

April 20 2020 – the scheme officially opened, albeit backdated to March 1 after concerns that a number of employees would slip through the net otherwise. Employers were able to claim 80% of their employees’ wages from the Government, up to a maximum amount of £2,500.

Mid-April – the Government announced that the furlough scheme would be extended by one month, to the end of June, as the country remained in strict lockdown

May 12 2020 – Rishi Sunak announced that the Coronavirus Job Retention Scheme would continue until the end of October, with new flexibility introduced from August to get employees back to work and boost the economy.

May 29 2020 – Sunak outlined further details on the extension of the furlough scheme, including improved flexibility to bring furloughed employees back part-time in July, and a new taper requiring employers to contribute modestly to furloughed salaries from August.

July 1 2020 – from this date, businesses were offered the flexibility to bring furloughed employees back part-time. During June and July, the Government were still paying 80% of wages up to a cap of £2,500, as well as National Insurance (NI) and pension contributions. Employers were not required to pay anything, unless they wanted to top up their employees’ salaries.

August 1 2020 – the Government were still paying 80% of wages up to a cap of £2,500, but employers now had to pay NI and pension contributions – around 5%, on average, of the gross employment costs the employer would have incurred had the employee not been furloughed.

September 1 2020 – the scheme was further tapered off, with the Government now paying 70% of wages up to a cap of £2,187.50. Employers now had to pay NI and pension contributions and 10% of wages to make up the 80% up to a cap of £2,500.

October 1 2020 – From this month, the Government must now pay 60% of wages up to a cap of £1,875, whereas employers are required to pay NI and pension contributions and 20% of wages to make up the 80% up to a cap of £2,500. By the end of October, the scheme will come to an end.


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