Furlough scheme to wind-down gradually Jul 2, 2020Views: 1945
As the government’s furlough scheme winds down in upcoming months, employers will need to contribute to employees’ wages and the Coronavirus Job Retention Scheme will end fully at the end of October.
Currently, employers can claim 80% of a furloughed employee’s wage costs, to a monthly maximum of £2,500. The government also refunds employer NICs and auto-enrolment pension contributions on this sum.
From August 2020, the level of grant will be reduced each month. Employers will have to start contributing to the wage costs of paying their furloughed staff, and this employer contribution will gradually increase in September and October.
- In August, the government will continue to pay 80% of wages up to a cap of £2,500, but employers will be required to pay employer National Insurance contributions and employer pension contributions. For the average claim, this represents 5% of the gross employment costs that they would have incurred if the employee had not been furloughed.
- For September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will need to pay employer NI contributions and employer pension contributions plus 10% of wages to make up 80% of the total, up to a cap of £2,500.
- In October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will need to pay employer NI contributions and employer pension contributions plus 20% of wages to make up 80% of the total, up to a cap of £2,500.
Employers will continue to be able to choose to top up employee wages above the 80% total and £2,500 cap for the hours not worked at their own expense if they wish. Employers will have to pay their employees for the hours worked.
After 31st October, the government contributions will finish and the scheme will come to an end.
When the scheme was extended until October, employers were promised that they would not face a ‘cliff-edge’ withdrawal of funding and that the scheme would be wound down gradually.
The wind-down phase of the furlough scheme is more generous than many had expected, with the majority of furloughed employee wage costs still being met by the government over the coming months. Depending on how the re-opening of businesses progresses, this approach may give some employers time to rebuild and save jobs that would otherwise have been lost.
Interested in finding out more about the new changes to the Coronavirus Job Retention Scheme? Watch our webinar on-demand where we discuss flexible furlough, the wind-down of the scheme and changes to making a CJRS claim.
You need to be logged in to comment