On Friday 29 May, the Chancellor, Rishi Sunak, announced how the Scheme will operate between 1 July and the end of the Scheme on 31 October 2020. Mr Sunak has made it clear that the Scheme is not intended to extend beyond 31 October 2020 by which point the unprecedented Scheme will have covered eight months.
Scheme to close to new entrants
The Scheme will close to new entrants from 30 June 2020. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three week period prior to 30 June 2020. This means that the last day on which an employer can place an employee on furlough under the Scheme will be 10 June 2020, so that the initial three week furlough period is completed by the cut-off of 30 June 2020.
Flexible furlough will be introduced from 1 July 2020, to allow employers to bring employees back to work on a part-time basis. Employers will be able to decide how the time split will operate in terms of the amount of time and shift pattern. The employer would pay their employees for their part-time hours. The employees would remain under the Scheme for the remainder of their time.
Scale back of Government support
Although furloughed employees will continue to be entitled to receive 80% of wages (subject to the £2,500 monthly cap) through to the end of October, Government support under the Scheme will be gradually scaled back from 1 August 2020 as follows:
- from 1 August 2020, employers will have to pay employer national insurance contributions and pension contributions. They will no longer be able to reclaim them through the Scheme.
- from 1 September 2020, employers will have to pay 10% of furloughed salary as the Government will only reimburse 70%. Of course, if the employer has agreed to pay furloughed employees more than the 80% of wages (subject to the £2,500 monthly cap) covered by the Scheme, the employer would have to top up to the agreed amount.
- from 1 October 2020, employers will have to pay 20% of furloughed salary as the Government will only reimburse 60%. Again this is subject to any agreement with the employee that they would receive more than the 80% of wages (subject to the £2,500 monthly cap) covered by the Scheme.
- the Scheme will close on 31 October 2020.
The above changes bring with them some uncertainty as the Scheme is currently concealing the true economic situation for employers and their employees. It is providing financial support to employers who would otherwise be considering redundancies or closure of the business.
This article is written as a general guide and believed correct at the date of publication. If you need further or more specific information relating to your situation, please get in touch with us.