Covid-19 Job Retention Scheme – Flexible Furlough explained
2nd June 2020 by Robin Watson
Since 1 March, the Covid-19 Job Retention Scheme (CJRS) was set up to support people, protect jobs and businesses through the pandemic, and has proven to be a lifeline to employees and employers, helping to prevent mass unemployment. On 29 May, Rishi Sunak announced changes to the scheme over the next few months.
Please find below the main points you need to be aware of, on a monthly basis;
- The scheme continues as from 1 March, The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance and pension contributions. Employers are not required to pay anything.
- From 1st July, businesses will be given the flexibility to bring furloughed employees back part time. Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them – and will be responsible for paying their wages while in work.
- For the hours the employee is furloughed, the government will pay 80% of wages up to a cap of £2,500 – as per June.
To enable the introduction of part time furloughing, and support those already furloughed back to work, claims from July onwards will be restricted to employers currently using the scheme and previously furloughed employees. The scheme will close to new entrants on 30 June, with the last three-week furloughs before that point commencing on 10 June.
- The government will continue to pay 80% of wages up to a cap of £2,500, however employers will be responsible for paying National Insurance and pension contributions. (For the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.)
Around 40% of employers have not made a claim for employer NICs costs or employer pension contributions and so will be unaffected by the change in August if their employee’s employment patterns do not change.
Many smaller employers have some or all of their employer NIC bills covered by the Employment Allowance so will not be significantly impacted.
Around 25% of CJRS monthly claims are below the thresholds where employer NICs and automatic enrolment pension contributions are due, and so no employer contribution would be expected for these payments to furloughed employees in August.
When claiming the CJRS grant for furloughed hours; employers will need to report and claim for a minimum period of a week, for grants to be calculated accurately across working patterns.
- The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay National Insurance and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. (For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.)
- The government will pay 60% of wages up to a cap of £1,875. Employers will pay National Insurance and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. (For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.)
If your business needs any support with the furlough process then please contact our team today and we will be happy to help.