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Preparing for the latest furlough changes – what you need to know

The ongoing Coronavirus pandemic is continuing to cause hardship for businesses and individuals alike. In a bid to provide additional much needed financial support, the Government has extended its economic support.

Arguably one of the most important interventions has been the Coronavirus Job Retention Scheme (CJRS), more commonly referred to as furlough.

First introduced a year ago, the scheme has provided an essential lifeline to employers, helping them shoulder the employment costs for employees who were unable to work or who work reduced hours due to the pandemic and its restrictions.

The furlough scheme had been due to end in spring 2021 but, to the relief of businesses and employees alike, it has now been extended until the end of September this year.

The 80 per cent furlough grant, up to a maximum of £2,500 per employee each month, will continue, as before, until 30 June 2021.

To prevent an abrupt end to this financial lifeline, from 1 July 2021, the amount paid will be gradually reduced – meaning that employers will be expected to start making additional contributions.

This gradual tapering means that, from July, Government support will be limited to 70 per cent, with the remaining 10 per cent provided by the employer.

Then, from 1 August until the end of the scheme on 30 September 2021, employers will be expected to contribute 20 per cent, with the Government covering the remaining 60 per cent.

In addition to the 10 per cent and 20 per cent contributions made in July, August and September, employers must continue to pay employers National Insurance and pension contributions on the full amount being paid to employees.

As well as extending the life of the scheme, the Government has also opened it up to more employees.

The latest guidance confirms that new employees who have not previously been eligible for furlough can be furloughed for the first time from 1 May 2021 onwards, if they were included in a Full Payment Submission to HMRC by 2 March 2021.

With the UK economy gradually reopening in the week ahead, it is hoped that the economy will bounce back and fewer businesses will have to rely on the financial support of the furlough scheme.

The reality is that some business owners may need to continue using the scheme for some time, while others may need to take more drastic steps and consider potential redundancies.

To find out how we can help you with the administration of these changes to the furlough scheme, please contact us.

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