Furlough Scheme | Key Changes from the 1st July

FREQUENTLY ASKED BUSINESS QUESTION

What changes are coming to the Furlough Scheme in July and August and what do I need to be aware of as staff members start returning to the city centre café that I run?

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How does the Furlough Scheme Work and How is it Changing?

The Coronavirus Job Retention Scheme (CJRS), often referred to as the furlough scheme, has been extended until the end of September, with significant changes from 1^st July 2021.

Since March 2020, the scheme has provided vital support to employers who have been impacted by the Coronavirus pandemic and has supported almost 12 million jobs across the UK.

From the 1^st July there are changes which reduced the percentage of employee wages covered by the Government as part of the gradual return to the workplace which is beginning to happen across the UK.

Furlough Scheme Changes From 1^st July

The key Furlough Scheme changes to be aware of include:

• The amount of grant available to employers reduced and employers will henceforth be expected to contribute towards the cost of furloughed employees’ wages.
• The amount the Government will contribute towards the employee wage for the time the employee is on furlough has now reduced to 70% from the 1st  July, with a maximum Government contribution of £2,187.50 per month. It is the responsibility of the employer to provide the remaining 10%, a cost of up to £312.50 per month for hours spent not working.
• During this time, employers must also continue to pay the employee ER National Insurance Contributions (NICs) and Pension contributions for the hours the employee is on furlough.

Furlough Scheme Changes to Expect From 1^st August

From August, the Government will reduce their furlough scheme contribution to cover 60% of the employee wage up to £1,875 per month for the time the employee is on furlough. The remaining 20% must be topped up by the employer and ER NICs and Pension contributions must continue to be paid by the employer.

When is the Furlough Scheme Due to End and Will it be Extended?

From September, the Government will continue to pay 60% of the employee wage for the time the employee is on furlough and the employer will continue to top up the remaining 20% as well as pay ER NICs and Pension contributions.

At the end of September, the current furlough scheme will end.

The changes to the CJRS serve as part of a gradual return to the workplace. The financial burden on the treasury will be eased, yet employers will still receive some support from the Government in paying employees’ wages up until the end of the scheme on the 30^th September.

Despite the changes in Government contribution, it’s important to note that the level of support employees receive (80% of their usual pay) will not change until the scheme ends in September 2021.

When the government announced recently a four week delay in lifting remaining lockdown restrictions to 19 July, at the earliest, many questioned whether the furlough scheme would also be extended.  However, the Government confirmed that it would not, despite some industries – principally the hospitality and travel industries – still being heavily impacted by the restrictions.

There are fears about a significant rise in unemployment when the furlough scheme ends and this increase in employer contribution to furlough pay may mean some employers, who are unable to afford to keep staff on furlough, may commence redundancies sooner. Only time will tell how many businesses will come through the challenges they face once the furlough scheme has come to an end.

Here to Help

As always, the team at FPM are here to help with all your finance and tax queries. For more information and assistance on the Furlough Scheme or other Coronavirus Government Schemes, please contact our Tax Team.