Furlough Scheme Extended
The Chancellor has just announced the extension of the Coronavirus Job Retention scheme which will of course have an impact for furloughed employees. Under the Scheme, employers who have properly furloughed employees, can recover from HMRC the lower of 80% of an employee’s regular wage costs or £2,500 per month plus the associated Employer national Insurance contributions and minimum automatic enrolment pension contributions on that subsidised wage.
The scheme which was originally only intended to run to 31 May 2020 was quickly extended to 30 June 2020. Take up of the scheme has been huge with the Government effectively contributing to the wage costs of over 7.5 million employees at a cost which some estimate is £2-3 billion a week.
The main points of this further extension are:
- The Scheme will be extended until 31 October 2020
- Until 31 July 2020, no changes to the Scheme with the Government paying wage costs at the current level under the Scheme
- From 1 August to 31 October 2020 the Scheme will continue but with greater flexibility to support the return to work of employees, including bringing back furloughed workers part time. The Government says that it will also be asking employers to start sharing the costs but no details on what this means in practice; and
- Further detail on the changes from 1 August will follow by the end of the May. We will of course provide updates once these details are available.
In the short-term, employers who have furloughed staff will need to consider if they are going to continue with furlough arrangements under the current arrangements and if so, whether employees will need to agree to any extension (which will depend on the agreement that employers have with the employees on furlough).
Longer term, once we know what the Scheme will look like from 1 August, employers will need to see what the additional costs are likely to be and what opportunities there may be for more flexible furlough arrangements including bringing back furloughed employees part-time.
If you have any questions on the Scheme or furloughing employees, please contact Matt Jenkin in the employment team.