Changes to the furlough scheme from 1 July 2021 – what you need to know

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Changes to the furlough scheme from 1 July 2021 – what you need to know

Published 1 julio 2021

The Coronavirus Job Retention Scheme is due to end on 30 September 2021.  As we reported in March, in order to phase out the scheme as we approach the end of September, the level of government grant will reduce and the amount employers need to contribute towards the cost of furloughed employees’ wages, will increase in stages.  The employer’s contribution will increase from today, 1  July 2021.  In July, the employer must pay 10% for unworked hours plus employer NICs and pension contributions.  In August and September, the employer contribution will increase to 20%.

The Employers' CJRS guidance, the Employees' CJRS guidance and the Claim guide were updated by HM Revenue & Customs on 17 June 2021.  They confirm that, from 1 July 2021:

  • The Government will pay 70% of wages up to a maximum of £2,187.50 for the hours that the employee is on furlough.
  • To be eligible for the government grant, employers will be required to top up the wages of employees on furlough to ensure they continue to receive 80% of wages (up to a maximum of £2,500) in total for the hours the employee is on furlough.
  • The wage caps are proportional to the hours not worked.

The table below, from the HMRC guidance, shows the level of government contribution available in each month, the required employer contribution and the amount that the employee receives per month where the employee is furloughed 100% of the time.

 

 June

 July

 August

 September

Government contribution: wages for hours not worked

80% up to £2,500

70% up to £2,187.50

60% up to £1,875

60% up to £1,875

Employer contribution: employer National Insurance contributions and pension contributions

Yes

Yes

Yes

Yes

Employer contribution wages for hours not worked

No

10% up to £312.50

20% up to £625

20% up to £625

For hours not worked employee receives

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month


For businesses that have been topping up employees’ wages above the 80% total  - that can continue.

The guidance has also been updated to specify that claims for furlough days in June 2021 must be made by 14 July 2021.

What does this mean for employers?

When the Prime Minister announced a four week delay in lifting remaining lockdown restrictions to 19 July, at the earliest, many questioned whether the furlough scheme would also be extended.  However, the Government confirmed that it would not, despite some industries  - principally the hospitality and travel industries -  still being heavily impacted by the restrictions.  The Government has now confirmed that the reduction in government support will also go ahead from 1 July as originally planned.  There are fears about a significant rise in unemployment when the furlough scheme ends and this increase in employer contribution to furlough pay may mean some employers, who are unable to afford to keep staff on furlough, may commence redundancies sooner.

Authors

Louise Bloomfield

Louise Bloomfield

Leeds

+44 (0) 113 251 4717

Joanne Bell

Joanne Bell

Manchester

+44 (0) 161 934 3179

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