Update To UK Furlough Scheme – How Will It Affect You?

With the end of lockdown insight for the UK, the recent focus has shifted from survival to how the economy can begin to get back to work.

It is estimated that 935,000 businesses signed up for the Government’s Coronavirus Job Retention Scheme. Despite its cost of over £10bn, it remains of significant importance to our economic recovery.

Employees will continue to receive 80% of their monthly salary up to £2,500 paid for by the government in June and July. From the 1st of July, the government is giving employers the flexibility to bring furloughed employees back on a part-time basis. It will be up to individual businesses to decide the hours and shift patterns their employees work when they return. Claims from July will be restricted to employers currently using the scheme and previously furloughed employees. The scheme will close to new entrants on 30th of June 2020 with the last three-week furloughs before that point commencing on the 10th of June 2020.

On the 29th of May, Chancellor Rishi Sunak announced that employers will have to start sharing the cost of the Coronavirus Job Retention Scheme. From August employers will have to pay Employer National Insurance and pension contributions for their furloughed employees. In September employers will be expected to also pay 10% of furloughed workers' salaries, increasing to 20% in October 2020. This means that people on furlough will continue to receive 80% of their salary up to a cap of £2,500.

What will employers be expected to pay for furloughed employees?

June & July:

• Employers are not required to pay anything.

The government will pay 80% of wages up to a cap of £2,500 as well as Employer National Insurance and pension contributions.

August:

• Employer National Insurance
• Pension contributions
• The government will continue paying 80% of wages capped at £2,500. 

Employers who have not made a claim for Employer National Insurance costs or employer pension contributions will be unaffected by the change in August as long as their employee's patterns don't change.

September: 

• Employer National Insurance
• Pension contributions
• 10% of wages to make up the 80% total to a cap of £2,500
• The government will pay 70% of wages up to a cap of £2,187.50.

October:

• Employer National Insurance
• Pension contributions for furloughed employees
• 20% of wages to make up the 80% total to a cap of £2,500
• The government will pay 60% of wages up to a cap of £1,875.

There is no doubt that this tapering system will provide some form of relief for the estimated 7.5 million people covered by the scheme and their employers.

Guidance for Self Employed 

The Chancellor also extended the Self-Employment Income Support Scheme with those eligible able to claim a second and final grant in August that will be capped at £6,570. The second grant will be worth 70% of their average monthly trading profits and is paid in a single instalment. Individuals can still apply for the first grant (a taxable grant worth 80% of their average monthly trading profits, capped at £7,500) until 13th July. So far this scheme has seen 2.3 million claims worth £6.8 billion.

Find out more about both schemes here.