The Faltering Furlough: changes to Coronavirus Job Retention Scheme

The Furlough scheme has kept open millions of British jobs which could no longer be done. But it’s too early to say that these jobs have actually been saved.

The easing of the lockdown of business will see employers gradually take a greater share of responsibility for meeting the wage bill at the end of the month.

Since April, the Coronavirus Job Retention Scheme has met 80% of the wage of those who have been unable to work.  

What is being introduced from 1^st July 2020 is the ability for those employees who have been furloughed to come back to work – but in return, the employer will have to chip in part of their wages.

How it will work is that the Government will continue to pay 80% of the normal wages, including pension and National Insurance (capped at £2500 pcm), but this will continue to be for the time they are not working.

However, the time the employee does spend working will now be paid at their usual rate, and this will not be reimbursed to the employer.

So it’s no longer an “either/or” scenario – employees can be furloughed for part of the week, but also work as well.

That is for July only – in August the employer will have to meet the NI and pension, although the maximum contribution to wage will still be 80% (to £2500) so the employee may see no real difference.

But in September, the Government contribution will reduce to 70% of wages up to a cap of £2,187.50 for the hours the employee is not working.  Employers will continue to pay employer NICs and pension contributions, and must also pay 10% of wages to make up to 80% of the total wages, up to the cap of £2,500.

Then in October, the Government contribution will come down to 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will continue to pay employer NICs and pension contributions, and will have to meet 20% of wages to make up to 80% of the total wages, up to the £2,500 cap.

The cap on the furlough grant is proportionate to the hours not worked. For example, if the employee is not working for 50% of his or her normal working hours, the cap would be £1,250 during July and August, £1,093.75 in September and £937.50 in October.

It is also important to note that the furlough scheme will close to new entrants from 30 June.  From that point onwards employers will only be able to furlough employees that have already been furloughed for a full three week period prior to 30 June. This means that the final date by which an employer can furlough an employee for the first time will be 10 June.

Will the scheme ultimately succeed? There will be some jobs that were furloughed which end up going anyway – all that has happened is a delay in redundancy.

But what it has done for many jobs is at least give them a chance of survival – the rest is likely to be influenced as much by science as economics.

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