Furlough and freelance schemes have changed: where does this leave designers?

More details have been finalised for the “tapering” of the Government’s furlough scheme, and a further (final) payment has been scheduled for self-employed workers.

As the country looks to gradually ease its way out of the coronavirus crisis, chancellor Rishi Sunak has announced changes to two of the government’s business support packages that could affect design businesses.

The news of the updates came on the evening of 29 May during the daily briefing. In the case of the Coronavirus Job Retention Scheme (CRJS – also referred to often as simply the furlough scheme), the announcement confirmed speculation that businesses will soon be required to pay out 20% of furloughed workers’ wages, with the government making up the rest.

Sunak also used the briefing to announce the next steps for the Self-Employed Income Support Scheme (SEISS), the self-employed and freelance equivalent to the CRJS.

Confirming the rumours of 60%

Whispers of a reduction of the furlough scheme to 60% have been ongoing since at least 12 May, when the chancellor announced support would be extended until October. Though these rumours have largely been proven correct, what the government seems to want to make clear is that that 60% figure will be reached “gradually”.

The thinking behind the updated scheme, according to the government, lies in what it has predicted will be a necessity for flexibility moving forward. As the country begins to reopen once more, the Treasury predicts businesses will likely not need their entire workforce working full time. Such measures mean then that staff can supposedly be brought back into the workplace in a part-time capacity without seeing a reduction in their wages for working less hours than usual.

This is likely to work best across the UK’s hospitality and leisure sectors, which will be able to put staff onto part-time hours and adjust accordingly to demand. It is less clear cut, however, for designers. Most design businesses have had contracts cancelled.Without an upsurge in business, many could be faced with paying out more than they’re earning right now. It is unclear right now how the government means to help in this situation.

The plan until October

Wanting to stress this “gradual” shift, the Treasury has outlined this plan for the CJRS in the coming months:

  • June and July: Government will pay 80% of wages up to £2,500, as well as employer National Insurance (ER NICS) and pension contributions. Employers not required to pay anything. (No change.)
  • August: Government will pay 80% of wages up to £2,500, but employer will pay ER NICS and pension contributions. For the average claim this works out to around 5% of gross employment costs for any given employee, had they not been furloughed.
  • September: Government will pay 70% of wages up to £2,190, and employer will pay ER NICS, pension contributions and 10% of wages up to cap of £2,500. For the average claim this works out to around 14% of gross employment costs for any given employee, had they not been furloughed.
  • October: Government will pay 60% of wages up to £1,875, and employer will pay ER NICS, pension contributions and 20% of wages up to cap of £2,500. For the average claim this works out to around 23% of gross employment costs for any given employee, had they not been furloughed.

SEISS update

Alongside changes to the CRJS, the Self-Employment Income Support Scheme has similarly been updated to reflect a country (or, at least, a government) preparing for the return to work. Having officially opened for claims three weeks ago, the SEISS has been extended, with claimants now eligible for another payment in August.

The first payment, initially announced back in March, was worth 80% of a self-employed or freelance workers’ average monthly takings (up to £2,500) and was paid in one three-month lump sum. This meant that though they had to wait some three months to get it, the top of the scheme was capable of paying out some £7,500 to workers.

This latest development sees the scheme reduced from 80% to 70%. Like its predecessor, it will be paid in a three-month lump sum, but will only be worth a maximum of £6,570 in total. This is intended, according to Sunak’s update on Friday, to be the final payment under the SEISS scheme – how the UK’s self-employed and freelance workers are expected to carry on beyond August has not yet been set out by the government.

Both schemes are UK wide, and for more information, please visit the gov.uk website.

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