Is your business ready for the changes to furlough?

Following the Government’s decision to extend the Coronavirus Job Retention Scheme (CJRS) earlier this year, businesses now have the opportunity to rely on this support until the end of September.

Introduced more than a year ago, the furlough scheme (as it is more commonly known) has helped many businesses to retain talented employees without having to meet their regular employment costs.

Now, as many sectors of the UK economy are re-opening and the recovery gets underway, changes will take place to the furlough scheme that reduce the financial support available to employers.

The 80 per cent furlough grant, up to a maximum of £2,500 per employee each month, will continue until 30 June 2021.

To prevent an abrupt end to this financial lifeline, from 1 July 2021, the amount paid will be gradually reduced – meaning that employers will be expected to start making additional contributions on top of the grant provided by the Government.

This gradual tapering means that, from July, Government support will be limited to 70 per cent (capped at £2,187.50), with the remaining 10 per cent provided by the employer.

Then, from 1 August until the end of the scheme on 30 September 2021, employers will be expected to contribute 20 per cent, with the Government covering the remaining 60 per cent (capped at £1,875).

In addition to the 10 per cent and 20 per cent contributions made in July, August and September, employers must continue to pay employers National Insurance and pension contributions on the full amount being paid to employees.

Beyond just extending the life of the scheme, the Government has also opened the door for employers to claim this grant for employees who have previously been unable to benefit.

As per the latest guidance, new employees who have not previously been eligible for furlough can be furloughed for the first time from 1 May 2021 onwards, if they were included in a Full Payment Submission to HMRC by 2 March 2021.

Although there are already early signs of economic recovery across the UK, many businesses may still need to rely on this scheme for some time and so they must be prepared for these important changes in advance.

To find out how we can help you with the administration of these changes to the furlough scheme, please contact us.

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