The government has confirmed that the furlough scheme will start to be wound down and phased out completely by the end of September. Kerrie Hunt, head of Thrings’ Employment and Immigration team, looks at what today’s announcement means for employers and their staff.
It will not have escaped employers’ notice that the Coronavirus Job Retention Scheme (CJRS) - or furlough scheme - changes with effect from today as it begins to wind down, with employers now having to make contributions to furloughed staff’s wages as the government’s contribution decreases over the next three months.
We are in familiar territory, however, as this was the case last summer when furlough contributions were wound down and the CJRS was due to be replaced by the Job Support Scheme (JSS) before the scheme was suddenly extended at less than short notice due to the November lockdown.
The Office for Budget Responsibility has said that unemployment is estimated to rise to 6.5% by the end of 2021 once the scheme ends. And while there are some calls for further extension, not least for those sectors still hardest hit, or even calls for a permanent scheme to support jobs, there are no signs this is likely or currently under consideration by the government.
So for any businesses that are still using the CJRS - and by way of reminder - until 30 June the government was paying 80% of wages up to a cap of £2,500. From 1 July, the government will contribute 70% and employers will have to pay 10% for hours not worked plus NICs and pension contributions. In August and September, the government will pay 60% and employers 20% plus NICs and pension contributions; the scheme is due to close completely on 30 September.
Employers will also need to top up holiday pay if this is taken whilst furloughed, which may be advisable where employees have continued to accrue and may have carried forward several weeks of holiday over the past 15 months.
As always, the grants must be paid to the employee in full and if using flexible furlough, the grant can be claimed for the hours that employees are not working, calculated in proportion to their usual hours worked, and employers must pay normal salary for any hours worked.
Again, as has been the case throughout, employers must keep a careful record to show that the employees were furloughed and eligible for grants under the scheme. HMRC may carry out audits for up to five years.
Please note: Nothing in this article constitutes legal advice and we are not liable for any reliance on the information provided. This is a rapidly changing subject, and whilst correct at the time of writing, circumstances may have changed since publication. Please refer to Gov.uk for up-to-date advice on the government’s response to this issue.
To find out more about anything covered in this article, or to discuss the potential impact of COVID-19 on your business, please contact Kerrie Hunt or another member of Thrings’ Employment and Immigration team.
