The UK Government will be reducing its contributions to the Coronavirus Job Retention Scheme from July 1st. The scheme, which is due to end at the end of September, is also not expected to be extended, despite a delay to the final lifting of lockdown in England.
Since its inception in March 2020, the Coronavirus Job Retention Scheme (CJRS) has been a vital lifeline for 11.2 million jobs in the UK during the COVID-19 pandemic. Both businesses and employees alike have welcomed the scheme as a much-needed lifeline during an unprecedented financial downturn in the country caused by the outbreak of coronavirus.
Earlier this year, Chancellor of the Exchequer, Rishi Sunak, set out a roadmap for the furlough scheme and extended the program until the end of September 2021. Part of the roadmap of the CJRS included a steady decline of how much the Government contributes to employee wages, with the decrease beginning at the start of July.
While the scheme has saved millions of jobs, the overall cost as of May 2021 sits at £64billion, with the UK deficit rising to £303.1billion – the highest level since World War II. This has dictated the Government’s approach to wean employers off the scheme as the country looks to reopen and become more financially independent.
Below we explain the details of the changes that are coming into effect from July 1st, and what they might mean for employers.
What Are The July 1st Furlough Changes?
The level of support that the Government provides employers has remained at 80% of their employees’ wage for a while. However, from July 1st, employers will be asked to increase their furlough contributions towards staff wages as the Treasury will decrease its support from 80% to 70% per employee.
Employers will be expected to contribute 10% of their employees’ salary for any hours not worked by the employee, while continuing to pay National Insurance and pension contributions.
The maximum for this payment will remain at £2,500 per month per employee, combined between the employer and Government contributions.
Current Furlough Process, pre-July 1st
- Government contribution: 80% of employee wages
- Employer contribution: 0% of wages, but can top up wages to 100%. National Insurance and pension contributions
- Minimum amount furloughed employee receives: 80% of regular salary, up to £2,500
Furlough Process After July 1st
- Government contribution: 70% of employee wages, up to £2,187.50
- Employer contribution: 10% of wages, up to £312.50, and can top up to 100% after this. National Insurance and pension contributions also.
- Minimum amount furloughed employee receives: 80% of regular salary, up to £2,500
Claims for furlough payments for the month of June must be made by employers by 14 July 2021.
You can no longer submit claims for claim periods ending on or before 31 October 2020.
What Does This Mean For Employers?
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 next month or so.
The maximum contribution of £312.50 may seem relatively small compared to the 70% the Government are contributing, but for small businesses or companies who have 10-50 employees currently on furlough this expenditure will start to add up - especially for those who have suffered as a result of the ongoing lockdown.
As the contributions from employers increase from July to September many companies may reconsider their resourcing options and look at restructuring or, unfortunately, redundancies.
UK redundancies rose to record high amid the second Covid-19 wave last winter, with the unemployment rate increasing to 4.9%, fueled by job losses in retail and hospitality.
As always, if you and your company are facing a number of redundancies and have questions about the processes, it is always prudent to get advice from redundancy process experts.
When Does Furlough End?
Despite the unlocking of the country of June 21st being delayed by up to four weeks, the Government has insisted that the furlough scheme is not expected to be extended beyond the planned date of 30th September 2021.
The delay now sees a partial lockdown continue until at least July 19th due to a recent rise in COVID-19 across the country. This has meant that some businesses and premises are unable to open to full capacity, and some must remain closed.
Before September, however, there will be further changes to the contributions employers are expected to make. For August and September, the contributions the Government makes will decrease by a further 10% to 60%. Employers will be expected to contribute 20% of their employees’ wages, capped up to £625. By this point the UK will hopefully be free of any lockdown restrictions, though redundancies are still expected.
How Percy Hughes & Roberts can help
Business owners are facing a number of tough questions from employees as the UK begins to start back up, 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. Get in touch with one of our Wirral Employment Lawyers today by calling 0151 666 9090 or by completing the “Get in touch” form on this site.
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