How to take advantage of the government's extended Job Retention Scheme

Rishi Sunak has extended aid for small businesses until at least the end of March

(Image credit: © Henry Nicholls/Pool/Getty Images)

Small and medium-sized enterprises (SMEs) still struggling with reduced levels of demand because of the Covid-19 pandemic will now be able to make use of a revamped Job Retention Scheme (JRS) until at least the end of March. Chancellor Rishi Sunak last week announced he would extend the JRS, which had been due to close at the beginning of December, and also reintroduce more generous terms that had previously been withdrawn.

As a result, any SME that is struggling to keep staff on the payroll because there isn’t enough work for them will now be able to put employees on furlough and claim the cost of most of their wages from the JRS. Importantly, the scheme applies to all businesses across the UK, not just those in England, which is currently subject to a four-week lockdown – and not just those in industries such as hospitality and retail, where firms are ordered to close.

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Now, however, the Treasury is going back to the 80% limit, though employers will still be responsible for workers’ pension and national insurance contributions, which the first iteration of the JRS paid for. Employees will thus receive 80% of their current salary for hours not worked, up to a maximum of £2,500 a month, with employers free to top up payments where they feel able.

The scheme remains very flexible. You don’t have to furlough staff for all the hours they would normally work, if you need them for at least some of the time. You can ask full-time staff to move to part-time working, or reduce the hours of staff who are already part-time, and then use the JRS to support them for the hours they would usually have worked.

Employers do not have to have made use of the JRS previously in order to claim from it in the weeks and months ahead; you can make a claim for any member of your staff who was on your payroll on 30 October, even if they have never been furloughed before. In addition, employees on your payroll on 23 September that you subsequently made redundant are also potentially eligible for the JRS. This means you now have the option of re-employing these workers and moving them on to furlough immediately. The only ongoing cost in such cases will be your staff’s national insurance and pension contributions.

For employers keeping furloughed staff on following the closure of the scheme, the chancellor had promised a “Job Retention Bonus”, a £1,000 payment for each member of previously furloughed staff still employed on 31 January 2021. With the JRS staying open, these payments will not now be made, though the government has promised to “redeploy a retention incentive” when the scheme does finally end.

Sunak also warned he would review the JRS in January. The government may at this stage begin to reduce the support that the scheme offers, paying a smaller proportion of staff salaries, as it did in October.

Emergency loan schemes extended

Small and medium-sized businesses in need of emergency finance will now have longer to use the state-backed loan schemes. Both the Coronavirus Business Interruption Loan Scheme (CBILS), offering advances of up to £5m, and the Bounce Back Loan scheme, which enables businesses to borrow up to a maximum of £50,000 or 25% of their turnover, will stay open until 31 January 2021. Both had been due to close at the end of this month.

In addition, the government has agreed to allow some firms that have already taken out Bounce Back loans to have a second bite of the cherry. Those that have not borrowed the full amount for which they were eligible may make a second application to the scheme, provided their total borrowing does not exceed the maximum allowed.

Nevertheless, it may not be straightforward to get a Bounce Back loan. The scheme has been hugely popular, with no interest to pay at all in year one, and rates capped at 2.5% a year thereafter. But many of the banks taking part will now lend only to existing business account customers.

On CBILS, meanwhile, where the government has not set a maximum interest rate, business advisers are warning firms to tread carefully. While most high street banks are charging annual interest rates of less than 6% on CBILS advances, some lenders in the scheme are demanding 15% a year.

More help for the self-employed

The latest changes to the Self-Employment Income Support Scheme (SEISS) mean self-employed people eligible for help will now receive support equivalent to what is on offer to employees through the Job Retention Scheme.

The government said last month that it would offer a third round of the SEISS, to cover the period from 1 November to 31 January 2021, with eligible self-employed workers able to apply for a grant of up to 40% of their typical three-monthly profits, up to a maximum of £3,750. Now, however, the chancellor has decided to double that grant to 80% of profits, with a maximum pay-out of £7,500. There will also be a fourth round of SEISS grants to cover the period from 1 February to 30 April, though the government has yet to outline how generous they will be.

While self-employed workers will welcome the increased pay-outs from the SEISS for the next three months, the scheme remains less inclusive than other forms of government support. You will only be able to claim one of the new grants if you were eligible for support during the first two rounds of the scheme – which ran from May to July and August to October – though you don’t have to have made a claim during either round. So self-employed workers set up for tax purposes as limited companies – rather than as sole traders – will continue to miss out as they were excluded from the first two SEISS rounds. There are thought to be 700,000 self-employed people losing out in this way. Anyone who became self-employed after April 2019 also cannot benefit since they can’t supply tax returns showing what profits they have been making.

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David Prosser is a regular MoneyWeek columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments. David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor.