Furlough scheme changes will come into force next month – new contributions explained

The furlough scheme, formally known as the Coronavirus Job Retention Scheme, was first announced by the Chancellor of the Exchequer Rishi Sunak in March last year. There has since been several changes to the scheme, in addition to extensions to the length of time it will last for.

Mr Sunak extended the furlough scheme earlier this year during the 2021 Spring Budget, announcing a new end date of September 30, 2021.

However, there are changes to the Government and employer contribution amounts up ahead.

Currently, the employer must contribute employer National Insurance contributions and pension contributions, and this will remain the case until the end of the scheme.

For periods ending on or before June 30, 2021, employers can apply for a grant to cover part of an eligible person’s regular wages, up to a monthly cap of £2,500.

However, from July 1, 2021, the level of the grant will be reduced.

That said, this shouldn’t impact on the employee’s income from the employer.

This is because from this date, the employer will be asked to contribute towards the cost of the furloughed person’s wages.

The Government website explains how the scheme works for an employee.

It says: “If you are fully or flexibly furloughed, your employer:

  • Will pay you at least 80 percent of your regular wages, up to a maximum of £2,500 per month, for the hours you are furloughed (not working)
  • Can choose to pay you more than the 80 percent minimum furlough amount – but they do not have to
  • Will pay you in full for any hours you do work whilst on flexible furlough.”
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From July 1, to be eligible for the grant, employers must continue to pay furloughed employees 80 percent of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

In July, the Government contribution for wages for hours not worked will be 70 percent up to £2,187.50.

The employer contribution wages for hours not worked will rise from zero percent to 10 percent, up to £312.50.

Further changes will take effect in August, with Government contributions for wages for hours not worked will drop to 60 percent – up to £1,875.

Meanwhile, the employer contribution wages for hours not worked will rise to 20 percent up to £625.

In September, the final month of the scheme, the Government will continue to cover 60 percent of wages for hours not worked, up to £1,875.

Meanwhile, employers will need to contribute 20 percent up to £625, for hours not worked.

This isn’t to say the employee can only receive 80 percent of their wages, as top up amounts are allowed.

The Government explains: “You can continue to choose to top up your employees’ wages above the 80 percent total and £2,500 cap for the hours not worked at your own expense.”



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