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How Changes to the CJRS Affect Umbrella Company Contractors

CJRS

The Coronavirus Job Retention Scheme (CJRS) has been running for some weeks now, and the Government has announced some staged changes to the scheme which will take place over the next few months as they look the end the scheme by the end of October 2020.

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The changes that have been announced for August will vastly increase the cost to employers, and as a result we will have to close our furlough scheme from the 31st of July. Payments will be made in August for the period ending 31st July 2020, but no payments will be made for any period after this date.

Below is a chronological breakdown of the changes the Government has announced.

Closing Dates for Newly Furloughed Employees

The CJRS will close to new entrants on 30th June 2020. From the 1st of July, the scheme will only be available to employers who have previously used it, in respect of employees they have previously furloughed.

Because employees must be furloughed for a minimum of 3 weeks, this means the last date on which an employer can furlough an employee was the 10th June 2020. Employees who are furloughed after this date cannot be included in claims made under the CJRS.

The CJRS in June 2020

Apart from being closed to new entrants, the CJRS will continue as it is through June. Employers can continue to claim 80% of furloughed employee salaries, up to a maximum of £2,500 per month, along with some associated employment costs.

Flexible Furloughing from 1st July 2020

From 1st July, furloughed employees can return to work part time. They would be paid as normal for the hours they work, and the grant can be claimed for hours that they don’t work. For example, if you return to work on 40% of your usual hours, the CJRS grant could be claimed for the remaining 60%. The scheme will otherwise remain the same, with the same levels of support in place.

In practical terms, your umbrella company is not in control of your hours – these are dependent on your client.

The current CJRS scheme was not designed with umbrella companies in mind, and is particularly complex for umbrella employers who are not directly involved in deciding who will work and for how long. The changes relating to part time working will only add to those complexities, and your umbrella company is unlikely to be comfortable administering the CJRS under those circumstances.

Orange Genie Employees should be aware that we have decided not to furlough our employees on a part time basis from July, in order to ensure that we remain in control of the process of paying and claiming correctly in line with CJRS guidance.

The CJRS in August 2020

Through August, the Government will continue to pay grants of 80% of employee salaries, with the same maximum of £2,500 per month. However, they will no longer cover any other employment costs. This adds the cost of employer’s national insurance and auto-enrolment pension contributions to the cost of your umbrella company’s furlough payments.

The financial burden on umbrella employers who are participating in the CJRS is already very high, since they have to pay all employment costs apart from employer NI and the minimum pension contribution, as well as covering their overheads with no income. Those umbrella companies who chose to furlough their employees accepted this financial burden and the risk it represents in order to do the right thing and support their employees. That desire to offer support will not have changed, but most will be unable to cover these additional costs and will have no choice but to end their furlough arrangements at the end of July.

Orange Genie Employees should expect our involvement in the CJRS to end on 31st July. We will be unable to make payments to furloughed employees for any period after this date. Having already invested so much money, time and effort in supporting our employees through the CJRS, we are disappointed that we can’t continue until the scheme’s end in October, but we're simply unable to cover these additional costs.

The CJRS in September 2020

From September, the amount of the CJRS grant will reduce from 80% of salary to 70%, with the employer being expected to make up the additional 10%. Again, this will increase the cost of furlough payments from the employer’s point of view, but will not change the amount the employee receives.

We think it unlikely that any umbrella company employees will still be furloughed by the end of August. For any who are, this second increase in the financial burden will make it even more likely that your umbrella will be unable to make further furlough payments.  

The CJRS in October

The CJRS closes on 31st October 2020, so October is the last month when the scheme will be available. For this last month, the government will contribute 60% of the employee’s salary, increasing the employer’s contribution of 20%.

Again, we don’t expect this change to affect umbrella company employees, as involvement in the CJRS will have become impossible before this point.

If you have any questions, or if we can help in any way, please call our expert team on 01296 468 483 or email info@orangegenie.com.

 

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