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Chancellor unveils changes to furlough scheme

Announced in March, just before the stringent Stay at Home measures limited the circumstances in which any of us were able to leave our home, the Coronavirus Job Retention Scheme (CJRS) has been seen as the flagship Government measure to limit the economic fallout from the Coronavirus crisis.

Since March, the scheme has allowed employers to furlough employees – keeping them on the payroll, while requiring that they carry out no work for the employer.

Employers have been able to claim a grant worth up to 80 per cent of their usual wages, capped at £2,500 a month, plus employer National Insurance Contributions (NICs) and automatic enrolment pension contributions.

However, the Chancellor, Rishi Sunak, has now announced a series of changes to the scheme, which will begin to take effect in the coming weeks.

A system of ‘flexible furloughing’ will come into effect from 1 July, allowing employers to bring back furloughed employees for any amount of time on any shift pattern, while still able to claim a grant in respect of the time not worked when they otherwise would.

Employers will have to pay employees at their usual rate of pay for any hours they work, while also covering the cost of Employer National Insurance Contributions (NICs) and minimum employer automatic enrolment pension contributions that this pay attracts.

They will need to reach new flexible furlough agreements with any furloughed employees brought back on a part-time basis.

From 1 August, CJRS grants will cease to cover Employer NICs and pension contributions, with this cost passing to employers. The grant will continue to cover 80 per cent of furloughed employee’s usual wages, up to a cap of £2,500 a month.

However, from 1 September, the value of the grant will fall to 70 per cent of a furloughed employee’s usual wages, capped at £2,187.50 a month. Employers will be expected to contribute the remaining 10 per cent plus NICs and pension contributions to reach a combined total payment to the employee of 80 per cent of their usual wages, up to a cap of £2,500 a month.

October will see the value of the Government contribution fall again to 60 per cent, capped at £1,875 a month, with employers expected to contribute 20 per cent of a furloughed employee’s usual wages plus NICs and pension contributions to reach the total of 80 per cent, capped at £2,500 a month.

At the same time, the Chancellor confirmed the closure of the scheme to new entrants from 30 June. After this point, employers will only be able to furlough employees who have been furloughed for three full weeks at any point before 30 June.

This means the last day an employer can furlough an employee for the first time will be Wednesday 10 June.

Furthermore, after 30 June, employers will not be able to claim for more employees in a claim period than the maximum number they have claimed for in any period under the scheme in it’s current format.

Full details of how the scheme will operate from this point are expected to be announced on 12 June 2020.


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