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Changes to furlough announced

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Rishi Sunak delivered his normal polished performance on Friday in setting out the changes to the Coronavirus Job Retention Scheme from 1st July 2020. Whilst confirming that the scheme would cease at the end of October 2020 he set out a framework for the measured withdrawal of the grant funding in line with his expectation that employers should start to meet some of the burden.

In summary:

  • Claims from July onwards will be restricted to employers currently using the scheme and previously furloughed employees.
  • The scheme will close to new entrants on 30 June, with the last three-week furloughs before that point commencing on 10 June.
  • Individual firms will decide the hours and shift patterns their employees will work on their return and will be responsible for paying their wages while in work.

From August 2020, the level of government grant provided through the job retention scheme will be tapered, with employers’ contributions increasing, to reflect that people will be returning to work.

  • In June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (NICS) and pension contributions. Employers are not required to pay anything.
  • In August, government payments remain as before, but employers will be required to pay employer NICS and pension contributions. Government analysis indicates that for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
  • In September, the government’s contribution to furlough wages will fall to 70%, up to a cap of £2,187.50. Employers will pay employers NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
  • In October, the government furlough contribution falls to 60% of wages up to a cap of £1,875. Employers will pay employer NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.

This means that the final date by which an employer can furlough an employee for the first time will be 10 June, in order for the current 3 week furlough period to be completed by 30 June. Employers will have until 31 July to make any claims in respect of the period to 30 June.