New furlough scheme will exclude financial services firms, but other support may be available to those still affected by Covid-19
The Financial Conduct Authority’s survey revealed that around 30% of authorised firms elected to place at least one member of staff on furlough during the period covered by the initial Job Retention Scheme. However, that scheme ends on October 31 and the new support arrangements being offered by the Government may not be available to FCA-regulated firms.
After insisting that there would be no extension of the furlough scheme, the Government has now announced that there will be a second furlough scheme. However, this is specifically for companies in Tier 3 areas who have been forced to close due to coronavirus restrictions, or for sectors which have remained closed nationwide since March. This realistically means pubs, bars, leisure centres, gymnasiums, casinos and betting shops in Tier 3 zones, and nightclubs in any area of England. From November 1 it will also be able to support businesses forced to close in Wales’ two -week ‘firebreak lockdown’.
The original furlough scheme paid up to 80% of an employee’s wages at one stage, but its replacement will provide just 67% of salary. All of the 67% will be paid by the Government, and the employer will only be responsible for paying the employee’s National Insurance and pension contributions.
The new scheme whereby companies can continue to employ someone on a part-time basis is available in all areas of the country, and in all business sectors, so conceivably it could be used by financial services firms. This Job Support Scheme requires companies to allow the employee to work for at least one-third of their normal hours. Then both the company and the Government would make additional payments to cover one-third of the unworked hours. For example, if an employee is contracted to work for 36 hours per week, but the employer only asks them to work for 12 hours per week, they would receive their salary as normal for those 12 hours. The company and the Government would then each make payments equivalent to the salary for eight hours, while the employee is not paid for the remaining eight hours.
Many practitioners in financial services operate on a self-employed basis, for example there are several thousand sole traders and partners who hold FCA authorisation. The Government continues to operate the Self-Employed Income Support Scheme to assist the self-employed should their business have been affected by the pandemic but, as with the furlough scheme, the level of state assistance on offer is no longer as generous as it was earlier in the year. Applications for the second taxable grant, worth 70% of average monthly trading profits, and paid out in a single instalment covering three months’ worth of profits, closed on October 19. However, a third grant will be available, covering the three-month period commencing November 1.
Support for small and medium sized limited companies affected by Covid-19 includes:
- Business Interruption Loan Scheme – overdrafts, invoice finance, loans and asset finance facilities where the Government guarantees 80% of the finance to the lender and pays interest and any fees for the first 12 months
- Future Fund – loans to innovative companies
- Bounce Back Loan Scheme – loans where the government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be just 2.5% per annum
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article