As of 1 September, employers who have put their staff on furlough now have to pay 10% of employee wages, while the government will pay the remaining 70%. This will then rise to 20% in October before it comes to an end on 31 October.
The furlough scheme was created to support those who could no longer work as a result of the pandemic and to help businesses in continuing to pay their staff, avoiding mass redundancies. The scheme has allowed employers to continue paying their staff while they couldn’t work, granting individuals 80% of their monthly salary up to a maximum of £2,500. The scheme can no longer be applied for, however employers already on the scheme will experience new flexible furlough guidelines.
How has it changed?
At the start of July, the scheme became more flexible before ending on 31st October 2020. The flexible changes made to the scheme only apply to employers currently using the scheme for previously furloughed employees. Employees can still receive 80% of their salary up to £2,500, however since August, employers now share the responsibility of paying National Insurance and salaries. From August, employers had to pay for NI contributions as well as pension contributions but can no longer claim a grant for either of these.
For the month of September, the government will pay 70% of wages for furloughed staff up to a maximum of £2,187 for hours not worked. Employers will now pay 10% of wages to make up the 80% total up to a maximum of £2,500 in addition to their total national insurance and pension contributions. The scheme will change again on 1 October, meaning that the government will pay 60% of wages up to a maximum of £1,875 for hours not worked and the employer will pay 20% to make up the total of 80% as well as the NI and pension contributions.
Job Retention Bonus
There has been concern that there may be significant job losses when the scheme ends in October, with many fearing redundancies. To encourage job protection, Chancellor Rishi Sunak announced his ‘Plan for Jobs’ explaining how the government will support UK’s economic recovery. As part of this, the Job Retention Bonus was announced, aiming to provide additional support for employers who keep their furloughed employees in work after the furlough scheme ends on 31 October. The bonus is a stand-alone payment of £1,000 to employers for every employee who they have claimed for under the scheme. To be eligible, employees must earn at least £520 a month between 1 November 2020 and 31 January 2021. Employers will be able to claim the bonus in January and payments will be made from February 2021. If an employee loses their job and is entitled to redundancy pay, this will be calculated on their pre-furlough wages.
The scheme has been successful since it took effect, with 9.8million workers placed on furlough by 1.2million employers since March. Employers made £34.7bn of furlough schemes by 9 August, with the scheme set to cost the government an estimated total of £80bn.
Businesses can no longer apply for new furlough claims other than people coming back from statutory parental leave or returning military reservists.
Find out more about the changes made to the furlough scheme here.