Budget 2021: The Employment Implications

Rishi Sunak has announced the much-awaited budget for 2021 hailing protection for the “jobs and livelihoods of the British people”. We outline below the key elements impacting employers and their wider workforce.

1) Extension of furlough

The main headliner is, as anticipated, the extension of furlough support under the Coronavirus Job Retention Scheme (CJRS). The CJRS, due to come to a close at the end of April 2021 has now been extended until 30 September 2021 in order to give employers the chance to get back on their feet as the economy reopens later this year.

Currently, employees receive 80% of their wages for the hours they cannot work, up to a cap of £2,500 per month, the full amount of which can be claimed from the government under the CJRS with employers paying the tax, National Insurance and pension contributions on the government grant.

As we experienced last summer, the CJRS will begin to taper off in July 2021 requiring employers to contribute (alongside the tax, National Insurance and pension contributions) 10% towards their staff’s wages (with 70% payable by the government) and this will increase to 20% in August and September (with 60% payable by the government). Employees will however continue to receive 80% of their wages up to the cap until the CJRS ends.

2) Support for the self-employed

The Self-Employment Income Support Scheme (SEISS) has now been extended offering much needed relief for the self-employed population. Like the furlough scheme, the SEISS has been extended until the end of September 2021.

The SEISS is open to those who have an income made up of at least 50% of self-employed work and who have a trading profit of less than £50,000 in 2018-2019, or an average trading profit of less than £50,000 over the respective financial periods between 2016 and 2019.

A fourth grant under the SEISS will run from February until April 2021 and will cover up to three months’ trading profits subject to a cap of £7,500. Self-employed people will be able to apply for the grant from the start of April.

A fifth grant will run from May to September 2021 but the amount available under the grant will depend on loss of income. Those whose turnover has fallen by 30% or more will be eligible for the 80% grant, but self-employed people whose turnover has fallen by less than 30% will only be eligible for a 30% grant, capped at £2,850. Those who are eligible will be able to apply for this grant from July.

The government is also widening access to grants and those who filed their tax returns for 2019-2020 by the deadline on 2 March 2021 are now eligible under the SEISS. As a result, it is expected that a further 600,000 self-employed people will now be able to apply for the grant for the first time.

3) Apprenticeships

In 2020, the government introduced incentive payments, in addition to the £1,000 employers already receive for hiring an apprentice, to support employers hiring new apprentices between 1 August 2020 and 31 March 2021.

The incentive payment, originally up to £2,000 dependent on age, has now been increased to £3,000 per apprentice (of any age) hired between 1 April and 30 September 2021. This is alongside an additional £126 million being made available to create 40,000 more traineeships in England for 16-24 year olds in the 2021/22 academic year. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

Additionally, there will be a new £7 million “flexi-job” apprenticeship programme in England which will allow apprentices to work for multiple employers within the same sector.

4) Benefits

Payment of Universal Credit was increased in April 2020 as part of the Chancellor’s response to the pandemic last year. This uplift of £20 per week has been extended for another six months, though MPs are calling for this to become a more permanent solution to help those who are on low income or out of work.

Eligible Working Tax Credit claimants will also receive a £500 one-off payment.

5) Living wage and Statutory Sick Pay

The National Living Wage will increase to £8.91 an hour from April 2021 (currently £8.72 an hour) for adults aged 23 and over.

Small and medium-sized employers in the UK will continue to be able to reclaim up to two weeks of eligible Statutory Sick Pay costs per employee from the government. So far, there is no indication of when this scheme will come to a close.

6) Combatting COVID-19 fraud

The government will invest over £100 million in a Taxpayer Protection Taskforce to combat fraud within the COVID-19 support scheme, including the CJRS and SEISS. This will be one of the largest responses to a fraud risk by HMRC which is unsurprising following the huge amount of people and businesses that have taken advantage of the schemes. Employers should make sure that they have all their paperwork in place and ready themselves for audits later this year.

Comment

The extended support will no doubt be a relief to many business and workers alike and certainly offers more breathing room whilst we wait for the re-opening of the economy. However, how the current government borrowing is paid back in future years remains a concern for business and individuals alike.