Changes to the Furlough Scheme

A few months ago many of us would have struggled to define the word ‘furlough’ let alone to have understood what ‘furloughing’ meant in the workplace. All that changed with the COVID-19 pandemic, when the UK government announced a radical (and expensive) new plan entitled the Coronavirus Job Retention Scheme (CJRS).
 
Employers have always been able to furlough staff (with their consent). However, under the CJRS scheme, employers are able to take staff out of employment for at least three weeks whilst the (taxpayer-backed) government pays up to 80% of their wages. The scheme has been welcomed by many, with over 1 million employers signed up to the scheme, to furlough 8.4 million jobs.
 
Fast forward to the end of May and Chancellor Rishi Sunak has just announced a number of changes to the Coronavirus Job Retention Scheme (CJRS), which he has said he aims to close by October 31. Workers who have been furloughed will still continue to receive 80% of their usual wages, up to £2,500 a month, to the end of October. However the amount that is paid by the government will gradually decrease as businesses start to open up again.
 
After the end of June, the CJRS will close to new entrants. After this date employers will only be able to furlough members of staff who have been included in a CJRS claim submission prior to 30 June. furloughed. In practical terms this means that the final date an employee can be furloughed is 10 June, so that they will have been furloughed for three weeks by 30 June. Employers will then have a month (to 31 July) to make any claims in respect of the period to 30 June. 
 
The next few months for businesses participating in the CJRS should run as follows:

June and July:

• The government continues to pay 80% of the wage bill for furloughed workers, as well as their National Insurance and pension contributions.
• From July furloughed workers can start to return to work part time, with arrangements decided on an individual basis with their employer, who will have to pay 100% of their wages for the hours worked, and then claim the furloughed portion of their hours not worked.
• Employers will need to claim for a minimum period of one week. 
• To be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing. 
• Employers will need to report both the number of hours worked and the usual hours an employee would be expected to work in a claim period. 
• From 1 July, in order to refelct the forthcoming changes to the scheme, employers will be unable to claim for periods which overlap calendar months.
• The number of employees an employer can claim for in any claim period will not be able to exceed the maximum number they have claimed for under any previous claim under the current CJRS.

• People on paternity and maternity leave who return to work after the 10 June cut-off date for the Coronavirus Job Retention Scheme (CJRS) will remain eligible for the government’s furlough scheme. The government have confirmed that this also applies to people on adoption leave, shared parental leave, and parental bereavement leave.

• Further guidance about how flexible furloughing can be implemented and calculated will be published on 12 June. 

August:

• Employers start to share the cost of the CJRS by paying National Insurance (NI) and pension contributions of furloughed workers, which amounts to an average of 5% of the gross employment costs of these employees. The government continues to pay 80% of the wages of this cohort.

September:

• Employers now need to pay 10% of furloughed workers’ wages, (plus NI and pension costs). The government will pay the remaining 70% up to a cap of £2187.50 per month.

October:

• The government’s contribution will taper to 60% of the wages for those being furloughed. Employers therefore need to pay 20% of their furlough salaries (plus NI and pension costs), to bring the wages for those workers up to 80% of their usual pay. The chancellor has said this represents 23% of the gross employment costs for an employer, had their employee not been furloughed.

 
As restrictions start to ease and the number of new cases of the virus declines, many businesses are now looking to start up again. We will be providing further guidance and support about flexible furloughing once guidance has been released on 12th June. If you need financial advice and guidance on ways to manage the post-COVID business situation, Scrutton Bland may be able to help. With services ranging from insurance to payroll, and business restructuring to apps for invoice management, there is probably a way we can help – leaving you to get on with what you do best: building your business.