The Coronavirus Job Retention Scheme will be extended until March, but could more jobs have been saved with greater clarity in Government planning?
Two rounds of changes to Government assistance schemes within a week have increased the help available to businesses. At the same time, they have led to uncertainty – and extra pressure for finance professionals.
Businesses were planning for the Job Support Scheme Open (JSS Open) to come in on 1 November.
However, when the Prime Minister announced a national lockdown it was decided to extend the existing Coronavirus Job Retention Scheme (CJRS). This was first extended until December. After further pressure, the Chancellor announced on 5 November CJRS will run until March 2021, covering the original 80% of salary levels.
Businesses across the UK had already invested a considerable amount of time and resources into preparing for JSS Open. Many had already decided to restructure in the light of the Government’s policy of tapering assistance and closing the scheme after October.
Because of the haste of the decision, the Government still needs to change the legal terms of the scheme and update its systems. Businesses will consequently be paid in arrears for that period.
AAT CEO Mark Farrar commented:
“It’s good to see the Chancellor recognising the severity of the economic damage some sectors are facing. However, this is creating yet more change and yet more pressure for the finance community as it supports businesses through this crisis.”
- Be eligible to all full or part-time employees who were on payroll on 30 October 2020.
- Retain the flexible-furlough element which had been brought in during July.
- Cover 80 per cent of employee’s salaries capped at £2,500 per month per employee.
- The scheme is open to employees and employers not previously using it.
- Anyone made redundant after 23 September can be re-employed and claimed for.
But what do accountants think about the extension and the last-minute decision to postpone JSS? Will it create more issues than it solves, or is it a welcome move?
The last-minute change has lost businesses time and money
Christina Nawrocki, managing partner, Wellers
The last-minute announcement to extend the CJRS will create many problems for businesses. We had already posted blogs, newsletters and were also providing advice about JSS. Clients have incurred costs in seeking advice around JSS and now it’s not relevant! Also, people have already made redundancy decisions and let people go. It was an exceptionally late turnaround. Fundamentally, some people will have already made decisions that will affect employees and their businesses that sadly may now be irreversible.
However, the CJRS extension is good news for SMEs overall and their employees who had been worried about their jobs. It also provides businesses with another lifeline through another unwelcomed lockdown period and will undoubtedly mean that employees will still get paid.
Next steps: It is key to remember there are other changes to the various grants and support schemes available. Although there is undoubtedly a focus on job retention, business owners also need to consider the future of the company in order to keep jobs alive once furlough ends. These include things like Bounce Back Loans and grants for businesses which have been forced to close due to the heightened restrictions.
Verdict: The last-minute change has caused headaches for businesses, but the overall principle of CJRS will be a lifeline for many businesses and their employees.
Businesses are exasperated and frustrated at sudden changes
Mahmood Reza, owner, Proactive Resolutions
Businesses are a resilient lot, and their staff certainly need to be. Companies are getting used to planning in cycles of days and not months. The extension of furlough to March is good news financially, but rostering, cash flows, communication and mental agility are stretched.
Also, some decisions have already been made regarding redundancy. Should businesses throw their plans in the bin? Hopefully, it’s not too late to save some of those jobs.
Clients have been exasperated and frustrated this week. They are having to rip up their previous plans around JSS and start all over again. They are unhappy about the uncertainty of the situation but there is also some acceptance that this is how things are and they are just trying to get on with it.
It’s likely that JSS will return at some point, so clients should think beyond March for rostering options and cashflow.
Next steps: Our advice to clients is to stay calm and try not to get overwhelmed with the news and latest developments. It’s also important to ensure that revised letters and agreements are sent to staff and that compliance is maintained.
Verdict: Businesses are frustrated at the last-minute change in plans and the general uncertainty but are managing to adapt.
The furlough extension adds some much-needed certainty in a difficult time
Nigel Morris, employment tax director, MHA MacIntyre Hudson
A UK wide furlough scheme with a fixed end-date and the flexibility to manage local and regional restrictions will be a real help for business drawing up their budgets. Companies now know what they need to pay out in NIC and pension costs over the coming months. The fact the Job Retention Bonus (JRB) and Job Support Scheme (JSS) have been deferred also provides additional clarity; businesses no longer face the prospect of grappling with a whole new set of rules, or the admin juggling act of using multiple support schemes.
There may still be some uncertainty and changes to come, particularly if the review the Chancellor mentioned for January results in a reduction from 80% of employee wages paid by the Treasury to say 70% or 60%. However, overall today’s announcement cuts the number of scenarios to consider and provides a basis for much needed planning on the best way to survive.
With advisers and businesses gearing up for the introduction of the JSS schemes and analysing the 11 documents issued on Friday, an announcement the next day to delay the introduction of the JSS schemes, extend CJRS and introduce slightly different criteria has impacted on the previous planning. It has made some of the work already undertaken redundant and resulted in numerous queries from clients on how the extended CJRS will work, particularly with annual leave and reference pay due to the new deadline for employees using an RTI submission.
These changes to plans will cause increased uncertainty about when things will change again, when JSS will come in to force and how this will impact on the viability of some jobs.
Next steps: We are advising clients to plan as best as you can, be agile, flexible and realistic. Utilise CJRS in the best way practically and financially for the business and employees, spend the lock down creating scenario plans for the 3 or 4 typical contingencies of full lock down and likely Tiers and how they may impact trading and future resources requirements. This will enable you to react quickly and with some confidence to any future revised levels of restrictions, or easing of restrictions.
Verdict: Businesses were already gearing up for the introduction of JSS but the sudden decision to extend CJRS has created a lot of extra work and more uncertainty.
My big lesson from last lockdown – everyone must share in furlough
David Chaplin, chartered accountant and chairman at Chaplin Group of hotels
Going into another national lockdown feels like fulfilling Einstein’s definition of lunacy. He defined lunacy as repeating the same action and expecting a different outcome. We shouldn’t therefore use this next period of lockdown as an opportunity to reinvent things we’ve already invented – measures are already in place.
In terms of furloughing staff: last time, we kept core teams of four or five people in the two larger hotels, despite the fact they were closed. But this time, I’m insisting that every single employee takes at least two weeks off on furlough. I’m doing that for the sake of their own wellbeing. Also, after the last lockdown, I noticed a slight ‘them and us’ feeling between those who had worked through It and those who hadn’t.
Possibly, with this lockdown lasting only a month rather than three months, there’s no chance of that. But it occurred to me that it’s better that everybody’s in the same boat and feels that they are contributing in both ways. So every single employee, from the most senior to the most junior, will take two weeks of furlough during this month.
Next steps: We will encourage staff to take annual leave during November as well, though it will cost us more in the short term. We don’t want to start December with yet more accrued holiday to be taken and paid for.
Verdict: We’re taking an ‘all in this together’ approach to furlough this time around.
Extending the CJRS makes it easier for businesses but likely to increase workloads
Kevin Winterburn, director Sheards Accountancy
In the short term, adjusting to the CJRS extension will be easier for businesses to manage than implementing the new JSS, simply due to familiarity with CJRS.
Payroll professionals will, however, be concerned about what is likely to be a considerable increase in their workloads, although maybe not to the levels seen during the first lockdown.
For accountancy practices, it’s simply having the time to do the additional calculations and also complete the claims. Understandably, businesses want to receive their information and grant payments as soon as they can, creating pressure on those dealing with it for them.
As a practice, we were not convinced that the take up of the JSS would have been very high. However, clients are much more likely to want to use the CJRS, a scheme that they are familiar with, during the second lockdown.
Next steps: We are advising clients to use this scheme where it is right for their business. However, the uncertainty over how long this lockdown will last is impacting upon decision making. Each business has its own unique circumstances which need to be taken into consideration.
Verdict: Businesses will find it easier to navigate CJRS because it’s familiar, while JSS was likely to have low take-up rates anyway
Annie Makoff is AAT Comment’s news writer.