The coronavirus "80% of income" schemes
A more detailed look at the two new HMRC "80% of income" schemes for furloughed employees (the Cronavirus Job Retention Scheme) and the self-employed (the Self-Employment Income Support Scheme)
In a previous summary blog - Money Worries and coronavirus - I looked at an overview of the financial help available to people whose income is being affected by the economic impacts of the coronavirus lockdown.
In this blog, I look in a bit more detail at the two entirely new, temporary but very significant schemes, announced by the Chancellor in late March, as part of the response to to the coronavirus pandemic. These are:
- the Coronavirus Job Retention Scheme (CJRS) - where HMRC will cover 80% of the wages of employees laid off because of the coronavirus lockdown
- the Self-Employment Income Support Scheme (SEISS) which will offer similar support to most self-employed people.
Wherever possible, the Government is hoping that people can carry on working from home. However, for many areas of the economy – e.g. retail, hospitality – entire businesses have been asked to shut down as part of the lock-down, while in other situations the work cannot be done from home, or part of the business is going to have to go on hold.
Now, this may seem to be more an issue for others in the household, rather than directly for those needing to take time out to go through cancer treatments or to be the main carer for someone else who is. There are more established routes to leave from work (paid and unpaid) and benefits to help those most directly affected by cancer.
However, both schemes can help with top ups and offer alternatives to the usual routes for financial support for people affected by cancer, For example:
- they can top up sick pay at certain points,
- actually offer paid carer’s leave or
- offer new support for a self-employed person who may happen to be affected by cancer
The idea behind both schemes is to put economic activity on hold - rather than just run it course - and so be in a position ready to quickly fire up again, as soon as it is safe to lift the restrictions. Otherwise there might have been be a large wave of layoffs, business collapses, and much greater disruption to people’s lives. And that in turn, might make economic recovery take longer and be more painful.
The Coronavirus Job Retention Scheme (CJRS)
This is the “80% of usual pay” scheme that applies to employees who are “furloughed” i.e. laid off because they cannot work from home or the business can’t keep going with a full complement of staff under the new lockdown restrictions.
Employees remain on the books with HMRC paying 80% of the salaries up to a maximum of £2,500 a month. This scheme to put employers and employees on hold, was initially due to last lasts for 3 months, with payments backdated from 1st March 2020. UPDATE: However it has now been extended; first to the end of June, but since then to the end of October. The scheme will carry on it its present form until the 1st August and will then roll off under a more flexible approach until 31st October, when it is due to end.
Who comes under the scheme?
The scheme applies to employers and employees who met the conditions from a certain date. UPDATE: This was originally set at 28th February 2020, but has now been reset to 19th March, the day before the scheme was announced.
- Employers must be registered on the online PAYE system with a UK bank account. This can include employers with just one employee e.g. a nanny right up to large companies
- Employees must have been on the PAYE books on or before 19th March. All types of employee can be “furloughed” under the scheme: full or part time, on flexible or zero hours contracts, foreign nationals, agency workers or apprentices. Fixed term contracts can be renewed while on furlough
Some other staff who are not employee, but are under the PAYE scheme, can also be furloughed e.g. : agency workers, office holders, company directors, salaried members of Limited Liability Partnerships, limb(b) workers and contingent workers linked to central government. See the HMRC guidance for more specific information if you think you fit into one of these categories
Public sector organisations are not expected to use the scheme, as they are expected to be redeploying staff from activities that are on hold into either home working or new roles to help with issues caused by Covid 19. Similarly private or third sector organisations largely getting specific public funding to provide services in relation to Covid-19. UPDATE However the Northern Ireland Executive have told local councils that they can consider this option.
Organisations getting some public funding - but primarily doing other things - could still use the scheme.
If a company has already laid off workers before the scheme started, then they can bring those staff back into active employment and then put them onto the furlough scheme.
It is by no means an all or nothing scheme - sometimes most of a company's activity is stopped by the lockdown, so all but a a skeleton staff may be furloughed. However, it may often be that only certain parts of the organisations activities are affected by the lockdown .
Staff who are on leave
The scheme doesn’t apply where a staff member is off sick and getting Statutory Sick Pay (SSP), but they can be furloughed once SSP finishes.
Self-isolation with symptoms of coronavirus is covered by SSP, with small firms (under 250 employees) having that funded by the Government
However, someone who needs to be shielded for 3 months (e.g. because of going through chemo) – or who need needs to join a person who is needs to be shielded (e.g. as a carer and/or to minimise risk - can be furloughed.
The usual Statutory Maternity /Paternity/Adoption Pay and Shared Leave schemes apply as before. But where additional contractual payments are made on top, then these can come under the scheme
Unpaid leave for carers and supporting a shielded person:
Some leave is usually unpaid where it is time out for "personal matters", rather than work ones. But there are circumstances where the furlough scheme can cover things
- Carer’s leave is often unpaid except for short paid absences as and when or perhaps in an emergency for up to say 2 weeks. Such employees can now be “furloughed” and covered by the scheme, so there is now a potential for paid carer's leave.
- That can also apply for employees who need to take time out to look after children, with schools being closed .
- And to those who need to go into shielding and lockdown with an extremely vulnerable person, to reduce the risk of transmitting the virus to them. The person directly affected might claim sick pay but furloughing might apply to them or others in their houuushold.
What can employees do while on furlough?
What you cannot do under the scheme - until the 1st August - is to continue any work for your employer that provides services or revenue to the employer. After August it is intended to offer a more flexible scheme allowing people to return part time ,whilst on furlough with Government and employer sharing the cost.
However, you can be involved in other voluntary work, while training is positively encouraged e.g. to keep yourself up to date and skills, and be skilled up for a quick return to work. You can also look at working with a different employer, but you would need to check that out and agree with your current employer, within the terms of your contract. For example, there may be limitations about say working for a competitor or how much other work is acceptable.
How does the scheme work?
- employers pay wages and salaries as normal. Where possible they are asked to top up the scheme to the full rates i.e. to pay the remaining 20%, but they do not have to. Many employers will have no business income to meet that 20%
- not all employees need to be furloughed to be covered by the scheme - in some industries it could be most of the staff, in others just a few.
- employers should discuss furlough with employees affected , make any contract changes by agreement and must confirm in writing that an employee is to be furloughed. The usual equalities and discrimination safeguards apply in relation to selection for furlough.
- HMRC will refund 80% of the pay up to a maximum of £2,500 a month per furloughed employee.
- UPDATE: The first update to the scheme - on 27th March 2020 - , also added in help with "oncosts". The scheme will also also cover employer’s National Insurance contribution and the minimum contribution to any pension scheme linked to that 80% of salary amount, increasing the help by up to £300 a month per employee
- for employees of over 12 months service, the amount will be based on the highest of the average salary over the year and the amounts paid in those same months in 2019. For employees of less than 12 months service, it will be based on average pay to date.
- the scheme covers: wages, past overtime, fees and compulsory commission payments. It does not cover: discretionary bonus and commission payments, tips and benefits in kind.
- claims will be made via an online portal being set up by HMRC. UPDATE: This has opened from on the 20th April, with new leaflets and calculation aids for employers and the first payments were made at the start of May
- thi wait has caused some real concerns re cashflow and business viability for some employers who have struggled to kee up payments until May. Options for government backed loans were a slowed up by the original Government insistence that banks assess loans against usual criteria and delays in communicating a change. The schemes have now been loosened up, so it is well worth any business that was turned down or has given up because of delays , checking back with those schemes.
- staff must be furloughed for a minimum of 3 weeks. They can return to work should some work come in - or tasks need doing for a bit . They can then return to furlough again. There are no limits as to how often that can happen, so someone could be going in and out of “furlough" under the scheme.
- during the time on furlough an employee retains all the usual basic statutory employment rights: e.g.: SSP, maternity leave, unfair dismissal and redundancy rights.
- the grants under this scheme count as business income in the usual way when it comes to calculating business accounts and tax liabilities
- being on furlough does not count as work for National Minimum Wage purposes – except for days training – so it is possible for furlough income to fall below national minimum wage levels.
- both Apprenticeship Levy payments and Student Loan payments carry on as usual and are not covered by the scheme.
What happens at the end of the scheme?
The scheme has now been extended to the 1st August on current terms and on a rolling off basis from then to the 31st October. Details will follow on what happens from 1st August , but the broadly, HMRC contributions will reduce as furloughed employees can start to resume business part time. There may be different arrangements for different sectors
When the scheme finishes, it is hoped that businesses will be well on their way to picking up where they left off, so that most furloughed employees will return to work. However there is no guarantee for employees or obligation for employers to do so. If a firm decides to cut staff and make people redundant, it would still need to follow all the usual redundancy rules around: consultation, selection, notice period and redundancy payment.
For more details on some specific questions please see the official guidance and Citizens advice guidance that is regularly updated. See the links below
The Self Employment Income Support Scheme
This is the equivalent 80% scheme for those who are self-employed. It took a bit longer to work out because there is a wider cross section of types of self-employment, income levels and a less current set of records compared to employees.
The scheme again lasts for three months from 1st March, but may also be extended. There have been no announcements on that as yet and it is possible that the Government are waiting to see the costs and explore how an ongoing scheme might work.
The SEISS provides an 80% taxable grant in arrears, that does not need to be repaid. However, it will count as income for tax and National Insurance purposes.
Who can qualify?
- you must have submitted a self-assessment tax return for April 2018/2019 and have been trading throughout that tax year.
- if you are very late in submitting that tax return, you have until 23rd April 2020 to do so and still be eligible.
- you must have been trading through 2019/20 and be be trading now - or would be if it were not for the Coronavirus restrictions - and be intending to continue to trade through April 2020 /21.
- you must have experienced some loss of trade due to Coronavirus - so you still qualify even if there were little earnings, you were unwell or had to take Covid-19 absences or have needed to claim benefits. "Trading" as in keeping a business going is different from making any net profits
- your trading profits must have been no more £50,000 a year and also be more than half your income in either April 2018/19 or averaged over the three tax years from April 2016 to April 2019
So, the scheme does not cover:
- those who were earning at the higher end of the income spectrum
- those who have only recently started trading i.e. who haven’t been trading right through April 2018/19 and since
- those who are only relying on self-employment for part of their income, rather than as their main income.
How much will I get?
- If you have submitted tax returns for the last three years - from April 2016 to April 2019 - then the grant will be based on the monthly average net profits over those three years
- If you haven’t - e.g. because you only started more recently or took a break - then they may go on either the last year or two years instead.
The one off grant payment will be made in June, based on 80% of the monthly amount that emerge from averages above, up to a maximum of £2,500 a month. If the scheme is extended, then there might perhaps be ongoing monthly payments or a different form of support. A review of the scheme is planned in June, so there are no announcements yet.
How do I apply?
HMRC are asked you not to contact them now, while they get the schemes up and running. They have been going through tax returns and setting up who is eligible and how much they will get.
UPDATE: HMRC have written to everyone in early May to say that the scheme is up and running and advise on what to do. You will need your UTI number which will be on the letter (or any other HMRC correspondence) or and your National Insurance number which won't be, for security reasons.
Go to HMRC Check your eligibility for a grant through SEISS where in fairly simple steps you:
- first check eligibility for a SEISS and can request a review if you are not eligible
- then apply for the payment and be told how much it will be. This will involve you signing in via the Government Gateway and verifying its you by entering a code sent to you. Payment of the SEISS should follow within 6 days of your claim. If you disagree with the amount , you are advised to carry on to claim the amount stated, but to request an online review.
What do I do in the meantime or if I am not eligible?
You may be eligible for increases in benefits that you are have already been claiming or you can can start claiming for benefits now.
There is two myths that Magie's Benefit Advisors have been hearing:
- an older myth that self-employed people cannot claim benefits,. This is wrong. The restriction only applies to Jobseeker’s Allowance (JSA) for being unemployed. If you are fully self employed then statutory payments from an employer are also out. However, many people are part time employed and part time self employed.
- that claiming benefits will stop you getting SEISS. It won't, but a SEISS payment can affect your benefits when it arrives.
You can still claim any of the other benefits, though entitlement will depend on you meeting the criteria for that benefit . Some benefits are non-means tested, so can be paid regardless of other income and savings, others are means tested , so there would be a financial assessment and the amount you get will depend on the sums. If you are entirely new to benefits, then likely ones to look at are:
- New-style Employment and Support Allowance (Ns-ESA) - paid for both being unwell and also if you are in self isolation or "shielding" in line with Government advice; and
- Universal Credit (UC) - this is the new general means tested benefit for people either out of work for any reason or in work on low incomes
However, many self- employed people have a low income when business is running normally, so you may already have been claiming "in work" help from either Universal Credit or through the "legacy benefits" that UC will eventually replace e.g Working Tax Credit (WTC) - to top up income - or Housing Benefit (HB) - to help pay the rent.
- if you are already on UC, this can adjust month by month, according to your new financial situation
- legacy benefits can adjust too, but not as much as they used to. You face a choice between: seeing how your "legacy benefits" can offer you increased support or switching over to Universal Credit (UC)
Do get advice before choosing to switch over to UC, as you cannot then switch back.
You will need to compare the help available from each system both now but also how they might look in the long term as things return to normal.
UPDATE : it is only later in the rush to claim UC that the DWP have issued warnings that just claiming UC, regardless of whether you get anything, ends your tax credits and any other legacy benefit claims. And you can't go back. The Secretary of State has said that they will look at ways you might be able to get your tax credits back.
There are also other forms of business support, through loans and tax payment “holidays” which can also help
Please see the companion blog - in the links below- for more details of benefits and other financial support
These schemes are new and changing
If you are affected by cancer, you may be looking to more established work sick pay schemes, self employed insurance cover or the benefits system, but these HMRC schemes may also be relevant in e.g topping up sick pay after SSP or offering paid leave for carers
Both schemes are very new, involve considerable amounts of Government spending and are finding their feet. How can they deliver in practise? Are they best meeting the basic aim of keeping people and businesses going to minimise the long term disruption that lockdown will cause? Are some people falling through the gaps ? Is the traditional benefits system able to act as an effective safety net, for those unable to access the schemes or while they are waiting to do so? How can the schemes adapt to constructive criticism and experience? e.g. see the Citizen Advice report below.
There have changes in the schemes even within their initial 3 months lifespan, and the blog has been updated, now that both schemes have developed their rules and processes and have both started paying out. Both schemes were up for review in June, but the CJRS scheme review has happened early and the scheme is ectended . News is awaited rabout any continuation or change for SEISS. So this blog has been updated and will continue to be so.
Do join the linked Conversation - The new HMRC 80% schemes- where you can post anyyour general queries and comments or share your experiences.
And do seek out individual advice - see details below - to check out how either these schemes or the more established benefits system can help you in these times of general disruption for all from Covid - 19 and the individual worlds still being turned upside down by cancer.
Where can I get help and advice?
All advice agencies are adapting to the fact that "face to face" interviews are usually not possible within current guidelines. But they are there for you in other ways. Maggie’s Benefit Advisors are no exception and many of us are still here to help people affected by cancer, but just in different ways. You can continue to access Maggie's support - whether with benefit or in so many other ways - by:
- calling or emailing your local Maggie’s Centre ; or
- calling 0300 123 1801 or emailing: firstname.lastname@example.org ; or
- checking out benefits support available within the Online community . To get the most out of it please register for free
- read through our cancer support pages on our website.
Maggie’s support – including Benefits Advice - is still very much here for you – but just not face to face in our Centres for the time being
Further reading and links:
- an overview of benefits changes and other financial help with coronavirus see Money worries and coronavirus
- a quick updater on both benefits and the 80% schemes at Coronavirus benefit changes a quick update of both blogs
- where to get further advice : Benefits Advice from Maggie's
- other suggestions and support please see other blogs Coronavirus Blogs page
Official guidance on the schemes from .gov.uk:
- The Coronavirus Job Retention Scheme (CJRS) from an employer’s perspective
- NEW ! Calculator - Work out 80% of your employees wages
- NEW! HMRC step by step guide for employers
- NEW! Claim for CJRS Payments
- The Coronavirus Job Retention Scheme CJRS) from an employee’s perspective
- The Self-Employment Income Support Scheme
- NEW! Check eligibility and claim a grant through SEISS