Furlough: a moving landscape

posted on June 5, 2020in the Blog Category

Furlough: a moving landscape

The latest on the UK’s Job Retention Scheme

On May 29th, Chancellor Rishi Sunak announced the much-anticipated plans to downscale the Job Retention (furlough) Scheme by October. The new guidance covers the formation of added flexibilities which will allow employees to work part-time whilst the government covers the wages of the remaining days, though employer contributions will be introduced.

The announcement was also used as a platform for the Chancellor to promote a “new collective national effort” to reboot the British economy, bolstered by an upcoming job creation scheme, details of which will be provided in the coming weeks.

Here, we outline the key changes to the Job Retention Scheme (JRS) and how these will affect employers and employees alike.

Furloughed workers can be brought back on a part-time basis from July

From July 1st, employers can invite furloughed workers back on a part-time or reduced-hours basis. They will still be able to use the JRS to claim for the hours the employee isn’t working.

For example, where an employer brings a worker back for three days a week, they will pay the wages for these three days themselves. However, the employer can continue to claim 80% of the employee’s wage for the remaining two days through the JRS. 

Employees need to be registered for the new scheme by June 10th

Rather than being an evolution of the current scheme, this flexible iteration is to be introduced as an entirely new entity with the current JRS terminating on June 30th.

In practice, this means that any business wishing to utilise the new, flexible scheme for employees must have put these employees on furlough by June 10th. This allows them to complete the mandatory three weeks required by the current JRS before it comes to an end.

No new provisions for new starters

Though the cut-off date for new-starters was pushed back from February 28thto March 19thso that more people could be included in the original JRS, this still isolated many new-starters and workers about to start new jobs.

Unless an amendment is made to the new flexible scheme, these workers remain ineligible.

Employers will not have to contribute until August

The current JRS will continue running as usual for the rest of June and throughout July, with the government paying furloughed staff 80% of their monthly wages up to a maximum of £2,500.

From August, this will continue to be the case, however employers will be asked to pay employer National Insurance and pension contributions. For the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.

From September employers will contribute a further 10% of wages

From September – the penultimate month of the scheme – government contributions will drop to 70% of wages,up to a maximum of £2,187.50. Employers will be expected to contribute the other 10% on top of National Insurance and pension contributions. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.

In October – the final month of the scheme – government contributions will drop again to 60% up to a maximum of £1,875, with employers needing to contribute 20% of wages.For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.

The self-employed income support scheme will also be extended

This had been scheduled to come to an end on the weekend of May 30th/31st, however, following significant pressure from various groups, the Self-Employed Income Support Scheme will be open for a second round in August.

The scheme will operate in the same way, though grants will be dropped to 70% of earnings, or a maximum of £6,570, for three months to align with the JRS.

Upcoming changes

Further changes to the new, flexible JRS are expected to be made on the week commencing June 8th. Check in with MBL to find out what these changes are and what they mean for your business.

 

 

 

AvatarWritten By: MBL Marketing

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