Changes announced to furlough as Government plans to wind down scheme

Furlough Changes

Chancellor Rishi Sunak has announced the details of the government’s plans to wind down its nationwide furlough scheme by October. This includes introducing employer contributions and creating new flexibilities to allow people to work part-time while still eligible for furlough grants.

In the past week, around 300,000 more workers have been put on furlough, bringing the total number of furloughed workers to 8.7 million since the start of the Coronavirus outbreak. This is equivalent to more than a quarter of the UK’s workforce. The scheme has meant thousands of businesses have been able to retain workers with the government paying 80% of an employee’s wages, up to £2,500 a month.

But as the government intends to wind down the furlough scheme in the coming months, the scheme is expected to look quite different.

Bring furloughed workers back part-time

From 1 July, businesses will be able to bring their furloughed employees back part-time . Employers will be required to cover the wages for this time. However, they can still claim from the job retention scheme for the hours the employee doesn’t work.

Employees must be on flexible scheme by 10 June

The flexible furlough scheme will be approached as an entirely new scheme while the current scheme will end on 30 June. New claims, however, will be limited to just those workers already furloughed before then. Therefore, any business who want to take advantage of the new scheme’s flexibilities must furlough these staff by the 10 June. This will enable them to complete the minimum of three weeks required by the current scheme before it ends.

Employer contributions start in August

The existing job retention scheme will continue running until the end of July, with the government covering 80% of wages. However, from August onwards, while the government will continue to cover the cost of wages, employers will be required to pay employer national insurance and pension contributions. According to the chancellor, this averages to around 5% of total employment costs.

Employers contribute 10% of wages from September

From September, the government will cut its contribution to 70% of wages. Employers will be required to cover the other 10% – if still paying workers 80% of their wages instead of topping this up to 100%. This will be on top of national insurance and pension contributions. In October, which is the last month of the scheme, the government will reduce their contributions again to 60% and employers must cover 20% of wages.

New job creation scheme

While the government have so far not released any further details, the chancellor used his announcement as an opportunity to commit to a “new collective national effort” to revive the UK economy. Ministers have since told the Financial Times newspaper that the government are planning a job creation scheme in a bid to address concerns over unemployment. This is expected to focus on upgrading infrastructure such as broadband. Meanwhile, the education secretary Gavin Williamson is believed to be working on a skills package designed to retrain workers.

The changes to the furlough scheme were largely welcomed by industry leaders, particularly the new flexibilities which could provide some encouragement to workers who have been on full-time furlough.

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For more articles and updates about Coronavirus and furlough, visit our dedicated pages; Coronavirus Advice and Guidance for Employers and our Return to Work Guide.

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