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01/06/2020

Coronavirus – Employers to contribute to furlough scheme from August

01/06/2020

Coronavirus – Employers to contribute to furlough scheme from August

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The Treasury has clarified plans for easing businesses out of the Coronavirus Job Retention Scheme.

Chancellor Rishi Sunak confirmed during the daily Downing Street press briefing on Friday 29 May that employers will gradually be required to contribute to the scheme, starting in August. Changes to the scheme will see businesses be offered the option to bring back workers who have been furloughed from July on a flexible, part-time basis. Sunak also announced that the scheme will close to new applicants from 30 June.

The furlough scheme, which has been extended until the end of October 2020, currently covers 80% of employees’ salaries, up to £2,500 per month. Over 8.4 million workers have so far been supported by the scheme, at a total cost of £15 billion. It was first introduced in March by the Treasury to help mitigate the job losses and economic impact of the coronavirus crisis.

The Chancellor said, “We stood behind Britain’s businesses and workers as we came into this crisis and we stand behind them as we come through the other side.

“Now, as we begin to reopen our country and kickstart our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining among the most generous in the world.”

On the whole, the gradual changes to the scheme were met with approval by key business groups and trade unions. General Secretary of trade union Unite Len McCluskey said: “The chancellor has listened to trade unions like Unite who have been calling for flexible and incremental changes to the jobs retention scheme to allow businesses to get back on their feet, protecting jobs in the process.”

Chairman of the Federation of Small Businesses Mike Cherry said, “By providing employers with the adaptability they’ll require as businesses adjust to a new normal, and bringing forward the flexible furlough launch date, the government is giving hope to small firms right across the UK.”

How will the furlough scheme be phased out?

 If you are on furlough, you’ll be able to stay on the scheme at the full furlough amount until the end of October. However, the way it’s paid will change.

 The first change to the furlough scheme will happen in August, when employers will be expected to pay both National Insurance and pension contributions for their furloughed workers. When it was first introduced, the Coronavirus Job Retention Scheme covered these costs, as well as 80% of an employee’s wage. The government will continue to cover 80% of furloughed workers’ wages.

  • In September, employers will be asked to contribute 10% of their furloughed workers’ salaries. Workers will still receive a full 80% of their wage, but the government contribution to it will drop down to 70%.
  • In October, the employer contribution will increase to 20% for furloughed workers. The government will contribute 60% of a worker’s total pay.
  • It’s been confirmed that the UK Coronavirus Job Retention Scheme will close on 31 October 2020.
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What else has changed about the furlough scheme?

The scheme will close for new applicants on 30 June. As of this point, employees can only be furloughed if they’ve already been furloughed for one full three-week period before this date.

This means that the last possible date by which an employer will be able to furlough an employee for the first time will be 10 June. If your employer hasn’t placed you on furlough by this date, they won’t be able to in the future.

If you’re furloughed, you can now be brought back to work from 1 July to work any hours or pattern, even if you’re a full-time employee. Any hours that you do work, you’ll need to be paid for at your usual rate of pay.

If you don’t work any hours you’re usually contracted for, this will be paid at the furlough rate. Lifting the embargo on working will give employers more flexibility to gradually phase workers back in if they’re needed.

So, for example, if you were brought back for 20 hours of your usual 40-hour working week, you’d be paid 20 hours at your full monthly rate, and 20 hours at 80% of your current wage; the furlough rate.

Help also announced for self-employed workers

In the same briefing, the Chancellor also announced a second grant for those self-employed workers whose finances have been left in turmoil because of the coronavirus crisis.

The Self-Employed Income Support Scheme (SEISS) was first introduced in April. Similarly to the furlough scheme, it was designed to pay 80% of self-employed and freelance workers’ income, based  on their profits from previous years. The initial scheme payment was made in a lump sum of up to £7,500, and designed to cover the months from March to May.

Now, the government has offered the self-employed a second wave of support, though the figure will drop down to 70% of their monthly profits. The grant will pay out up to £6,570.

It doesn’t matter if you haven’t yet claimed the support, you’ll still be able to apply for this second grant. Unlike the Coronavirus Job Retention Scheme, if you are self-employed and wish to continue to work and earn, you can do so even if you’re in receipt of the SEISS payment.

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