CJRS: Contractor limited companies ‘can’t duck 10% wages top-up requirement’
Contractor limited companies using the furlough scheme won’t be able to duck the 10% top-up required to wages since September 1st, accountants are warning.
“Although the government grant has decreased, employers are still required to top this up to ensure that furloughed employees still receive 80% of their wages up to a cap of £2,500.”
'Wage contributions now needed'
Offering an example, the accountancy firm said: “A 70% grant up to £2,187.50 will [require] a 10% top up from [the] employer [up] to a maximum of £312.50.”
Put another way, financial contributions from the limited company (as the employer) to the furloughed workers’ or directors pay is “needed”, said the firm’s Siddharth Agarwal.
“Many employers must already be aware but [this is] a reminder that further contributions…[have been] required from Tuesday September 1st,” the tax manager said.
“Further changes will come into force from October 1st, when the government grant will reduce to 60%.”
October is also the month when the CJRS ends, yet warnings of resultant job losses have not prompted the government to even suggest the scheme will go beyond its wind-up date of the 31st.
“Employers have been wary of losing talented people but, without further government support, difficult choices are and will be needed,” warns Mark Hammerton, partner at Eversheds Sutherland
“Personally, I would consider a revised scheme targeted at staff genuinely unable to work due to quarantining for Test and Trace, shielders and local lockdown reasons.”
'Furlough ending so soon'
Neil McCallum, a consultant who advises directors keen to reduce costs and inefficiency, is also concerned with the CJRS’s hard deadline.
“I must admit I have reservations about [the] furlough [scheme] ending so soon.
“It is clear that we are far from ‘back to normal,” he said. “[Although] I accept we need to ‘get on with it’ and the economy needs to adapt.”
'Uncertainty and strain'
John Bate, a small business accountant, said he just hopes any ‘adaptions’ by the government’s hand at Autumn Budget 2021 are made sensitively.
“With the furlough scheme unwinding, and now talk of corporation tax increases, the uncertainty and strain on small business continues.
“Surely a blanket corporation tax increase would be counterproductive?” he posted. “Small businesses need to be supported and encouraged to invest if the economy is to recover.”
'Crunch point for the economy'
Christopher Greenough, CCO at SDS Technology reflected: “There are still around one in twelve workers’ wages being paid by the state [via the CJRS].
“And so it would be sensible to see that this is the crunch point for our economy. We will hopefully see some signs of growth from this point onwards, but there will be tremendous pressures to work through.”