The furlough scheme is an integral part of the financial support given to businesses and employees during the pandemic. But since the announcement that the end of lockdown has been extended from June 21 to July 19, it has got people asking if the furlough scheme will be extended as well?
You can find out if the furlough scheme will be extended and when it is currently planned to end, right here.
The successes of the furlough scheme
The furlough scheme is part of the Coronavirus Job Retention Scheme and currently pays 80% of employee wages up to a maximum payment of £2,500 per month. It is estimated that the UK Government has already handed out over £55 billion as part of the scheme, designed to protect business, jobs and even whole industries such as travel.
What does flexible furlough mean?
The furlough scheme was adapted in July 2020 to allow businesses to get staff working for so many days a week, and then furlough them for others. The business would be responsible for paying hours worked, while the furlough scheme would cover unworked hours. This was a smart move to allow businesses to open to some degree and rotate staff for everyone’s safety.
When does furlough end?
Furlough as we know it right now will end at the start of July. This is despite Boris Johnson extending the lockdown until July 19 due to fears that the Delta strain of the virus could cause more hospitalisations and put the NHS under stress.
However, the furlough scheme is only ending in July in the way and percentages we know of it today. From July through to September the furlough scheme will continue, but businesses will be required to contribute to some of those unworked hours.
Furlough until the end of June
From now until the end of June, the furlough scheme will remain the same with the government paying for 80% of wages up to a maximum of £2,500.
Furlough until the end of July
In July, the government grant reduces to 70% of staff wages for unworked hours with a maximum payment of £2,187.50. However, staff must still earn 80% of their monthly salary capped at £2,500, which means businesses will be asked to pay 10% of their staff’s wages. The most a business will be asked to pay for this 10% is £312.50 per staff member.
Furlough until the end of August
There will be similar changes in August with the grant being reduced to 60% of each employee’s wages, bringing the cap down to £1,875. But again, the rule that staff must be paid 80% of their unworked hours remains and employers will need to contribute a further 20% of their wages. This means making a payment of up to £625 to each employee to cover the shortfall between the government grant and the 80% requirement.
This is not the first time that the furlough scheme has changed this way. It was previously changed to resemble the above in parts of 2020 as the UK went in and out of lockdowns.
Will businesses need to cover pension and NI contributions?
As soon as businesses are required to make contributions to their employees’ wages from July onwards, they will need to make some contributions to any workplace pensions and National Insurance contributions too.
Will furlough be extended into September?
There is no indication that the furlough scheme will be extended beyond August. As the vaccine programme drive continues to be successful, it is unlikely that the UK will experience further lockdowns – touch wood. Therefore, it is unlikely that social distancing will need to be continued, or at least to a degree that would prevent businesses from opening and trading like normal again.
Struggling to understand your future furlough obligations?
If your business is struggling to understand its furlough obligations for July and August, why not speak with our team? We can explain the situation to existing clients to help them with their related business financial affairs.
Contact our UK Accountant team, today!