September’s Changes to the Furlough Scheme
01st September 2020
The Coronovirus Job Retention Scheme (CJRS) has been a legitimate lifeline to both businesses and families across the UK. Under the system, employers have been able to “furlough” their PAYE workers, keeping their jobs open while getting up to 80% of their wages funded by the government. One thing Chancellor Rishi Sunak’s always been pretty clear about, however, is that the help wasn’t going to last forever.
In fact, the changes actually started back in July, with rules encouraging firms to start bringing back furloughed workers on a part-time basis. Employers would pay them for the hours they were putting in, and could apply for a grant to cover any of their normal hours they were being furloughed for.
On top of that, since the 1st of August, employers have been funding their workers’ National Insurance and pension contributions themselves. On the 1st of September, the rules of the game changed again. The money employers were able to claim was scaled back to 70%, with a cap of £2,187.50 per month. This, naturally enough, is going to see businesses faced with making up the shortfall, with a £2,500 per month maximum.
To put it in perspective, this 10% drop could leave employers topping up wages by as much as £312.50 per employee per month. That’s not the end of the changes, though. When October rolls around, the government’s contributions are going to drop again by another 10%. Come Halloween, the scheme’s set to wind up altogether.
There are some understandably shaky nerves about businesses shedding jobs as the help they’ve been getting tails off. Despite the Coronavirus Job Retention Scheme pulling back the assistance they qualify for, employers will still be expected to top up wages for their employees to the 80% they were getting before (again, with an upper limit of £2,500 a month). For some, that’s going to feel like a mountain they really can’t afford to climb with the pandemic still causing so much damage.
Obviously, the government’s keen to try and head off any potential rush of job losses. To sugar the pill a bit, they’re offering what the Chancellor called a “job retention bonus” for employers who keep their workers on. Every employee brought back from furlough will score businesses £1,000 to soften the blow of the CJRS fading away. The rules for this say that employees need to earn an average of at least £520 per month from November 2020 to January 2021 to qualify for the bonus.
Timeline for the scaling back of the CJRS
- 1st of September 2020
The government’s contributions to employees’ wages drop to 70%. Employers pay 10%, plus National Insurance and pension contributions.
- 1st of October 2020
Government contributions drop again to 60%. Employers make up the difference with a 20% contribution of their own. Again, NICs and pension contributions fall on the employer.
- 31st of October 2020
The Coronavirus Job Retention Scheme winds up altogether.