Treasury is to gradually withdraw its job retention scheme over the next five months, with businesses meeting 20% of the wage bill for their furloughed staff by October, Chancellor Rishi Sunak said.
Taxpayers have been meeting the wage bill for 8.4 million workers, at a cost of about £14bn a month, since March. The scheme was aimed at preventing mass layoffs, as lockdown restrictions caused large parts of the economy to shut down.
Employees have been receiving 80% of their usual wage, up to a maximum of £2,500 a month. One million firms are using the scheme, according to data released this week.
Sunak said that from August, firms will have to pay employer national insurance and pension contributions for staff they continue to keep on furlough. In addition, they will have to pay 10% of their wages in September. This will rise to 20% in October.
Sunak said: “We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.''
Firms will only be able to apply for the job retention scheme or furlough additional employees until 30 June.
Presenting Friday’s daily coronavirus briefing in Downing Street, Sunak also announced self-employed workers whose income has been hit by the crisis would be able to claim a second grant.
Those who qualified for the Treasury’s self-employment income support scheme would be able to apply for another payment, calculated as 70% of their monthly profits, up to a ceiling of £6,570. The first round of payments was based on 80% of monthly profits.
The Office for National Statistics said GDP declined by 2% in the first quarter of the year – despite the fact lockdown restrictions only came into force in March.
KEY DATES
June and July
The government will pay 80% of wages up to a cap of £2,500 plus employer national insurance (ER NICs) and pension contributions. Employers are not required to pay anything.
The scheme will close to new entrants on 30 June. In July, businesses can start bringing furloughed staff back part-time and employers will pay their wages for hours worked.
August
The taper starts. The government still pays 80% of wages up to £2,500, but employers must now pay ER NICs and pension contributions. For an average employer this represents 5% of employment costs had an employee not been furloughed.
September
Government pays 70% of wages up to a cap of £2,190. Firms must contribute 10% of wages plus ER NICs and pension contributions – about 14% of gross employment costs pre-furlough.
October
Government pays 60% of wages up to a cap of £1,875. Employers contribute 20% plus ER NICs and pension – about 23% of gross employment costs pre-furlough.
Grants cut for self-employed
The extension of the scheme will include grants being cut to 70% of average monthly trading profits from the current level of 80%. Applications will be allowed from August.
The funds will be paid out in a single installment covering three months’ worth of profits, capped at £6,570 in total.
