Changes to the Furlough Scheme: What You Need to Know
Earlier this year, the government extended the Coronavirus Job Retention Scheme until 30 September 2021. As things stand, the scheme will be revoked at this point although (as history has shown!) the government has had a penchant for making last minute U-turns during the course of this pandemic and so whether this will be the case in practice, is unknown.
However, starting next month, the level of grant available to employers under the scheme will reduce, and employers will be required to contribute towards the cost of their furloughed employees’ wages. To be eligible for the grant post 30 June 2021, employers will need to continue paying furloughed employees 80% of their wages, up to the same cap of £2,500 per month, for the time that they spend on furlough.
From 1 July 2021, the government grant for hours not worked will reduce to 70%, capped at £2,187.50 per month. Then, from 1 August 2021, the contribution will reduce further to 60% up to a cap of £1,875.00. Employer national insurance contributions will remain due until the end of the scheme, and employers can continue to choose to top up their employees’ wages above the 80% total (and £2,500 cap) for the hours not worked, at their own expense.
At the date of writing, there have been no relevant updates to either the employer guidance or the employee guidance in respect of the wider use of the scheme. Again, there is time for this to change however as things stand employers will still need to have a valid furlough agreement in place and employers can still implement a flexible working arrangement if desired.
Whilst the government’s vaccination programme is going smoothly and it is hoped that by September the remaining restrictions on business will be removed or, if not, manageable, there is still without doubt a degree of uncertainty. Employers who are considering implementing changes to their businesses ahead of the withdrawal of the CJRS should start planning for these changes now. Employers can no longer use the furlough scheme as a contribution to either employee notice pay or redundancy pay which, in some cases, will be a relevant factor for businesses who are considering the most efficient way of effectuating change.
Author: Charlotte Geesin, Head of Employment Law & Business Immigration