Changes to Coronavirus Job Retention Scheme July 2020
From this month important changes will be made to the Coronavirus Job Retention Scheme.
At the end of May the Government confirmed that the initiative would continue until the end of October, but with some adjustments made from July to encourage a kick-start to the economy and get people back into work.
Currently employees are able to be furloughed in blocks of three weeks at any one time and employers can claim up to 80% of an employee’s wages to be covered by the government grant, up to a maximum £2,500. Staff are then ‘furloughed’ – which means they are not allowed to work at all during this period.
Government statistics announced on the 23rd June 2020 revealed 9.2million workers and around 1.1million businesses are signed up to the scheme in the UK since applications opened on the 20th April. With this equating to £22.9bn in claims, the changes are ultimately to start the process of handing back the wage burden from the national purse to employers.
From July 1 2020, furloughed workers are allowed to return to work part-time, but with their employers asked to pay their salaries while in work – this has been brought forward by the Government by one month. Claims from July onwards will also be restricted to employers currently using the scheme and previously furloughed employees. The scheme closed to new entrants on 30th June 2020 and if a new furloughed employee was not placed on furlough by 10th June 2020, then they may not be covered under the new scheme going forward. This is the date set by the Government to ensure that employees serve a minimum of three weeks on furlough at any one time in order to be eligible to recoup the payments.
Then in August, although the Government will maintain the 80% payment, every employer will be expected to pay their workers ER National Insurance Contributions (NICs) and pension contributions – which on average represents 5% of the normal employment costs incurred.
In September the Government guarantee will start to reduce, with 70% of wages centrally covered up to a cap of £2,190. Employers will pay ER NICs and pension contributions and 10% of wages to maintain the 80% total, up to a cap of £2,500.
Then in October, which will be the final month of the scheme, the Government will pay 60% of wages, up to a cap of £1,875. Employers will then be expected to fulfil the necessary contributions and 20% of the wages to maintain the 80%, up to the threshold. This payment will be used to substitute the grant contribution currently made by the Government, while ensuring the employee continues to receive 80% of their salary, up to the £2,500 threshold.
Although it’s hoped this will allow businesses to gradually reintroduce their workforce back into action as the economy restarts after lockdown, there is sure to be concern from organisations about the level of their recovery after such a long period without income, and whether they will be able to take back the burden of these wages. With reports of rising unemployment, redundancies and record-levels of Universal Credit applications there is natural concern that more people could lose their jobs in the coming months if economic recovery is slow.
Scrutiny has also been raised with the suggestion of fraudulent claims being made by employers, as well as people missing out on any support having not met eligibility criteria. For those self-employed, the self-employed grant has also been extended, with applications opening in August for a second and final grant payment. There will be parity with the reducing furlough scheme, paying 70% (not 80%) of average earnings up to £6,750.
More guidance on the implementation and changes to the scheme can be found on the Government website.
If you have any questions about furlough or need assistance implementing it with your staff, please contact our employment team on 01603 620508.
This article was produced on the 7th July 2020 by our Employment team for information purposes only and should not be construed or relied upon as specific legal advice.