04 Jun 2020
On 29 May 2020, the Chancellor of the Exchequer, announced changes to the Job Retention Scheme. The Scheme provides wage assistance for businesses affected by coronavirus. Now, it will slowly be wound down until the end of October when it will cease in its entirety.
This means you’ll need to begin contributing to the wage costs of furloughed employees. The good news is that this will be in a slower fashion than previously thought.
29th May updates
Guidance on the increased contributions has confirmed the following:
- In June and July, the government will pay 80% of wages up to a cap of £2,500. This is as well as employer 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 pay 80% of wages up to a cap of £2,500. But, employers will pay employer NICs and pension contributions for the hours the employee doesn’t work.
- 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 also pay employer NICs and pension contributions and 10% of wages to make up 80% 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 doesn’t work. Employers will also pay employer NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
As furloughed employees can return to work on a part-time basis from 1 July, the new caps will be proportional to the hours not worked.
In addition, the old scheme will be closed to new entrants from 30 June. A new flexible furlough method can be used by employers from 1 July. This will see employers being able to bring furloughed employees back on a part time basis. The hours worked will be funded by the employer and the Scheme will continue to cover employees for the remaining working days of the week. The details released so far are:
- From 1 July, you can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern. You will still be able to claim under the Scheme for their normal hours not worked.
- From 1 July, you will be able to agree any working arrangements with previously furloughed employees.
- When claiming the grant for furloughed hours; you will need to report and claim for a minimum period of a week.
- This is a minimum period and those making claims for longer periods such as those on monthly or two weekly cycles will be able to do so.
- To be eligible for the grant, you must agree any new flexible furlough arrangement with the employee. This should be confirmed in writing.
- You can claim the grant for the hours you employees aren’t working. This is calculated by reference to their usual hours worked in a claim period.
- You will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
- For worked hours, you will pay employees subject to their employment contract. You’ll be responsible for paying the tax and NICs due on those amounts.
Further guidance on flexible furloughing and how employers should calculate claims will be published on 12 June.
And remember, from 1 July, you can only furlough people who have previously been furloughed. That means the last date for employers to put employees on furlough for the first time is 10 June.
Although the employer contribution is to be phased in more slowly than expected, a lot of businesses may not be ready to take the hit of these extra costs. The hospitality sector is likely to be one of the hardest hit, with a 100% drop in takings with no fixed date yet for re-opening.
For further guidance on the latest changes to the job retention scheme and furlough, speak to one of our experts on 01455 858 132.
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