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Coronavirus & Flexible Furlough: Changes to the Job Retention Scheme

Chancellor of the Exchequer Rishi Sunak has announced changes to the Coronavirus Job Retention Scheme which will take effect from August 2020.

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Published 2 June 2020

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Chancellor of the Exchequer Rishi Sunak has announced changes to the Coronavirus Job Retention Scheme from 1 August 2020.

In June and July, the Scheme will continue as before, with the Government covering 80% of the cost of furloughed employees’ monthly salaries up to a maximum of £2,500 per month. No employer contributions are required, although employers can of course choose to pay furloughed employees more than 80% of salary and more than £2,500 per month.

From August, however, while the Government will continue to cover 80% of the cost of furloughed employees’ monthly salaries (up to the cap of £2,500 per month) it will require employers to cover the cost of all National Insurance contributions and employer pension contributions.

From September, the Government will cover 70% of the cost of furloughed employees’ monthly salaries and employers will have to contribute 10%.

In October, the Government’s contribution will reduce to 60% of employees’ monthly salaries, with employers having to pay 20% of the cost.

The monthly caps for September and October will be reduced in line with the percentage reductions.

The Scheme will come to an end by 31 October and the announcement will mean that employers who have placed employees on furlough leave are likely to face hard choices ahead – in particular, the extent to which jobs can be saved or whether restructuring is needed. In the case of the latter this process is likely to start during the remaining furlough period so that redundancy consultation and notice periods tick down before the scheme ends on 31 October.

The Self-Employment Income Support Scheme will also be extended, with applications opening in August for a second and final grant. The second grant will be 70% of three months’ worth of the self-employed worker’s average monthly trading profits. This will be subject to a cap of £6,570.

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Shorter Reads

Coronavirus & Flexible Furlough: Changes to the Job Retention Scheme

Chancellor of the Exchequer Rishi Sunak has announced changes to the Coronavirus Job Retention Scheme which will take effect from August 2020.

Published 2 June 2020

Associated sectors / services

  • Employment law for employers
  • Employment law for employees

Authors

Chancellor of the Exchequer Rishi Sunak has announced changes to the Coronavirus Job Retention Scheme from 1 August 2020.

In June and July, the Scheme will continue as before, with the Government covering 80% of the cost of furloughed employees’ monthly salaries up to a maximum of £2,500 per month. No employer contributions are required, although employers can of course choose to pay furloughed employees more than 80% of salary and more than £2,500 per month.

From August, however, while the Government will continue to cover 80% of the cost of furloughed employees’ monthly salaries (up to the cap of £2,500 per month) it will require employers to cover the cost of all National Insurance contributions and employer pension contributions.

From September, the Government will cover 70% of the cost of furloughed employees’ monthly salaries and employers will have to contribute 10%.

In October, the Government’s contribution will reduce to 60% of employees’ monthly salaries, with employers having to pay 20% of the cost.

The monthly caps for September and October will be reduced in line with the percentage reductions.

The Scheme will come to an end by 31 October and the announcement will mean that employers who have placed employees on furlough leave are likely to face hard choices ahead – in particular, the extent to which jobs can be saved or whether restructuring is needed. In the case of the latter this process is likely to start during the remaining furlough period so that redundancy consultation and notice periods tick down before the scheme ends on 31 October.

The Self-Employment Income Support Scheme will also be extended, with applications opening in August for a second and final grant. The second grant will be 70% of three months’ worth of the self-employed worker’s average monthly trading profits. This will be subject to a cap of £6,570.

Associated sectors / services

  • Employment law for employers
  • Employment law for employees

Authors

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