The Chancellor announced this month that the furlough scheme is to be extended until September 2021. What exactly has been announced and what are the implications for employers?
Earlier this month, Chancellor of the Exchequer, Rishi Sunak, announced in the Spring Budget that there was to be an extension of the Coronavirus Job Retention Scheme (CJRS) for all sectors until 30th September 2021.
The well-received news came as the Government released plans to relax lockdown restrictions over the next three months. Many employers anticipated that the CJRS, better known as the “furlough scheme” would close at the end of June 2021.
The announcement means that the furlough scheme will remain in place for several months after the planned reopening of the country on 21st June and will have been in place for a total of 18 months by the time it closes for good.
Government statistics show that approximately 4.7 million employees are currently furloughed, with the highest proportion of employees coming from the accommodation and food services sectors. As of 15th February 2021, the historic scheme has seen £53.8 billion claimed by struggling businesses affected by COVID-19.
What are the details of the furlough extension?
For the time being, the furlough scheme will continue to pay up to 80% of employees’ usual pay, capped at £2,500 per month. However, the level of government support will reduce in the final stages of the scheme. This is set out like so:
- Government will pay the full 80%, until July 2021
- In July, employers will contribute 10%, while the government will contribute 70%
- In August and September, employers will contribute 20% and the government will contribute 60%
- Furlough scheme ends 30th September 2021
The government has updated its guidance on claiming wages through the job retention scheme to reflect the extension. Some details, such as calculating furlough pay for new starters who joined between 31st October 2020 and 2nd March 2021, are still to be clarified.
What are the implications for employers?
The reaction from employers has been hugely positive, with the government handing them a further lifeline as the country finally comes out of lockdown and the economy begins to heal. However, employers do need to be aware of what the changes mean moving forward, especially for industries that do not expect an immediate resurgence to normal trading in the short term.
The government previously introduced a 10% employer contribution in September 2020 which saw a significant drop in the uptake of the scheme, as many employers assessed whether or not they could afford the contribution. It is likely we will see a similar scenario in the coming months.
As the contributions from employers increase from July to September, many companies may reconsider their resourcing options and look at restructuring or, in some cases, redundancies.
It is also likely that public scrutiny of which organisations are claiming under the furlough scheme will begin to increase. The government will continue to publish the names of companies and LLPs that claim under the furlough scheme, together with an indication of the value of the claim.
Other key points for employers to consider are:
- Employers will continue to pay all employees’ national insurance and pension contributions during furlough. Companies are still liable for the minimum automatic enrolment contribution rates.
- Flexible furlough will continue as an option, meaning employees can work part-time and receive a furlough grant for any unworked hours. This allows employers to bring back employees gradually as the economy slowly reopens.
- Employers can claim for new starters who began working between 31st October 2020 and 2nd March 2021, but will need to wait until May 2021 before furloughing them.
Returning to work after being furloughed
Understandably, many employers have questions surrounding how to bring furloughed employees back to work after such a long time. Some questions our employment law experts are receiving include:
- Can a furloughed employee refuse to return to work?
- Do I need to give employees notice when coming from furlough?
- Where do vulnerable employees fit into the ending of furlough?
- How do I deal with employees who are worried about their commute?
Our employment law team has written a guide for employer s who have questions about returning to work. You can read our Returning to work after being furloughed – An Employer’s Guide here.
How Percy Hughes & Roberts can help
Business owners are facing a number of tough questions from employees as the UK begins to emerge out of lockdown, particularly in relation to furlough. In the first instance, we would advise employers to take a practical approach, communicating to employees as much as possible. If you have any questions about the furlough scheme, we are more than happy to assist.
At Percy Hughes & Roberts, we have a team of employment lawyers who boast years of experience and promise a confidential, friendly, and honest approach to all issues within the employment law field. If you have any questions regarding workplace safety or any issue surrounding this area, you can get in touch with our team for expert advice.