On 29th May 2020, the Chancellor, Rishi Sunak, announced more details about the extension to the Furlough Scheme, also know as the Coronavirus Job Retention Scheme (CJRS), with three main changes gaining attention:
- From 1 July 2020, the scheme will be made more flexible to enable employers to bring previously furloughed employees back part-time and still receive a grant for the time when they are not working.
- From 1 August 2020, 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.
- The scheme will close to new entrants from 30 June.
From 1 July 2020, employers will have the flexibility to bring previously furloughed employees back to work part-time – with the government continuing to pay 80% of wages for any of their normal hours they do not work up until the end of August. This flexibility comes a month earlier than expected to help people get back to work.
Employers can decide the hours and shift patterns that their employees will work on their return and will be responsible for paying their wages in full while working. This means that employees can work as much or as little as their business needs.
Any working hours arrangement that employers agree with their employees must cover at least one week and be confirmed to the employee in writing. When claiming the CJRS grant for furloughed hours, employers will:
- Need to report and claim for a minimum period of a week.
- Be able to choose to make claims for longer periods such as on monthly or two weekly cycles if preferred.
- Require to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked.
If employees are unable to return to work, or employers do not have work for them to do, they can remain on furlough and employers can continue to claim the grant for their full hours under the existing rules.
From August, the government grant provided through the Coronavirus Job Retention Scheme will be slowly tapered.
- In June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICs) and pension contributions for the hours the employee doesn’t work – employers will have to pay employees for the hours they work.
- In August, the government will continue to pay 80% of wages up to a cap of £2,500, but employers will pay ER NICs and 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.
- In 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 pay ER NICs, pension contributions and 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 pay ER NICs, pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500.
- The cap on the furlough grant will be proportional to the hours not worked.
For smaller employers, some or all of their employer NIC bills will be covered by the Employment Allowance, so they should not be significantly impacted by that part of the tapering of the government contribution.
Around a quarter of CJRS monthly claims relate to wages that are below the threshold where employer NICs and auto enrolment contributions are due, and so no employer contribution will be required for these furloughed employees in August.
It’s important to note that the scheme will close to new entrants from 30 June. From this point onwards, companies will only be able to furlough employees that have been furloughed for a full three-week period prior to 30 June.
This means that the final date that you can furlough an employee for the first time will be 10 June for the current three-week furlough period to be completed by 30 June. Employers will have until 31 July to make any claims in respect of the period to 30 June.
If you are struggling with CJRS calculations, or any aspect of the UK’s furlough scheme, activpayroll is here to help. Please contact our Audit & Compliance Manager Simon Wright via email email@example.com.