Part-time furlough will create challenges for agents and the gig economy

The Chancellor has announced that the Coronavirus Job Retention Scheme (CJRS) will continue until the end of October to give businesses more breathing space.

But he also announced major changes to the scheme, which could add to its complexity for those managing payroll.

Until the end of July, the Government will continue to pay furloughed workers 80% of their current salary, up to a maximum of £2,500.

However, the level of Government support will be reduced from August until the end of October. Employers will be asked to pay a percentage towards the salaries of their furloughed staff for the first time.

Another major change is that from the start of August, furloughed workers will be able to return to work part-time.

Kirsty McGregor of the Corporate Finance Network commented:

“The extension to furlough is welcomed for businesses although the calculations will be more complicated for accountants and I hope HMRC will consider changing the application process.”

Where a company is furloughing fewer than 100 staff, agents and payroll staff have to apply for grants manually. HMRC has resisted calls to make the bulk upload of applications available to smaller employers.

AAT understands this is due to the disappointing quality of data uploaded by larger employers. Rather than compound the problem by making this feature more widely available, HMRC decided to put development resource into bringing forward the Self-employment Income Support Scheme.

“The flexible furlough from 1st August will mean that only part of the 80% may be claimed from HMRC under the CJRS scheme as the remaining payment will be topped up by employers. This could mean that an accountant (or payroll clerk) is calculating a different amount of grant for each employee.”

Rosie Berridge, FMAAT, and head of AAT’s Edinburgh branch commented:

“I’m cautiously pleased – but I will wait for the technical guidance to be issued by the end of May.  That is when we accountants will need to be doing our homework and advising clients.”

Berridge, who is director of Edinburgh practice Accountability, adds:

“For now – it’s a case of reassuring clients measures are in place until the end of July and trying to make sensible comments in respect of how employers bring staff back in due course.

Paul Donno FMAAT and AAT Council member commented:

“The [CJRS] scheme has been great and the extension will be good for business. But there needs to be a more flexible approach to get the economy back to work in my opinion.

“A degree of flexible working may be needed.  People will be needed part-time [initially] and then [will need to] work up to full time as business picks up.”

“For example, a restaurant client of mine is doing takeaways Friday and Saturday only and would like to use staff on two days.  They are also looking at takeaway coffee and cake at reduced rates again staff needed for reduced time. 

“The staff are on zero hours contracts but earn more on Furlough than they do by returning on an ad hoc basis to see if things work.

Meanwhile, there is no extension to the Self-Employment Income Support Scheme (SEISS).

The scheme has been designed to provide the self-employ with a level of support matching that for furloughed workers. It is currently scheduled to expire at the end of June.

Kirsty McGregor commented:

“The self-employed have always had the additional benefit of being able to continue working and earning a living whilst still being eligible for SEISS, so I understand why the Chancellor hasn’t sought to extend that scheme.

“However I do believe he should bring in some support for landlords who have been excluded from virtually all of the schemes to date.”

David Nunn is a former Content Manager at AAT.