Last reviewed 26 August 2020
For many employers, August has been the start of a very important period of post-coronavirus economic recovery. However, as September begins, employers need to be aware of the details pertaining to some upcoming changes to the Job Retention Scheme. Ben McCarthy, senior researcher and employment law writer at Croner-i, outlines this in more details below.
The Coronavirus Job Retention Scheme (furlough scheme) was put in place to support employers who were not able to operate as normal due to the pandemic. Since 20 March 2020 when the furlough scheme came into effect, thousands of employers have furloughed all, or part, of their workforce and, initially, claimed 80% of employee wage costs, to a maximum of £2500 per employee per month. Use of the scheme has been substantial and continues to be so, but the Government has been adamant that it cannot go on forever, and indeed August saw the start of key changes to the Scheme as we move towards the date it is currently expected to end in October.
Changes that came into effect from 1 July
Prior to 1 July, all employees placed on furlough could not conduct any work for the company that they worked for or an associated organisation. On this date, that previous instruction changed; furloughed staff could be asked to return to work on a part-time basis, for example they could be furloughed for three days in a week and then work for the remaining two. However, staff needed, and continue to need, to be paid in full for any time that they work.
Changes that came into effect from 1 August
Until 1 August, employers had been able to claim the portion of the employee's wages, together with National Insurance and employer pension contributions, an arrangement that had been in place since the scheme began. However, from the start of August, employers were asked to pay employee National Insurance (NI) and pension contributions of furloughed workers' wage costs in relation to the hours that the worker did not work. This represented the start of the Government decreasing funding for the scheme, which is only set to continue going forward.
Changes that came into effect from 1 September
From 1 September, further contributions from employers are needed. On this date, the Government's grant decreased to cover 70% of furloughed employee wages at a reduced cap of £2187.50. Employers are now expected to top up the remaining 10%, up to a maximum of £312.50 per month. As with August, they are also expected to continue to pay employee NI and employer pension contributions.
Changes that come into effect from 1 October
From 1 October, the situation changes again. Here, the Government will only cover 60% of furloughed employee wages at a cap of £1875, meaning employers will need to top up the remaining 20%. As said above, this is the final month of the Scheme — after 31 October, employees will no longer be able to be placed on furlough.
Looking beyond 31 October
Despite calls for them to do so, the Government has confirmed that the furlough scheme will not be extended past 31 October in any capacity. As such, employers need to be ready for when the scheme does finally come to an end. As an incentive to encourage them to retain staff, the Government have established the Job Retention Bonus. Under this, employers will receive a bonus of £1000 for every employee who was previously furloughed and is kept on until at least 31 January 2021, provided they meet the below eligibility criteria:
they have been continuously employed by the company from the time of the company's most recent claim for that employee until at least 31 January 2021
they have been paid an average of at least £520 a month between 1 November 2020 and 31 January 2021; the employee does not have to be paid £520 in each month, but must have received some earnings in each of the three calendar months that have been paid and reported to HMRC via Real Time Information (RTI)
up-to-date RTI records are available for the period to the end of January 2021
they are not serving a contractual or statutory notice period, that started before 1 February 2021, for the employer making a claim.
These changes to the scheme are likely to have an impact on employers who are still reliant on it, and they will need to make sure they are following the rules for claiming the grant fully. As the scheme is wound down, it may be that other options for cutting costs will need to be considered. However, for now, it remains in place to assist employees and whether it will be extended, although unlikely, does remain to be seen.
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