Chancellor outlines plan to reduce furlough support
The Chancellor Rishi Sunak has outlined further details on how the Coronavirus Job Retention Scheme (CJRS) support, including the furlough scheme, will be reduced in the coming months.
The current financial assistance – with the government paying up to 80% of furloughed employees wages (up to £2,500) – will continue unchanged through June and July, but will be slowly decreased from August.
From 1st July 2020, businesses will be allowed to bring furloughed employees back part-time while still claiming some support, a month earlier than previously announced. The hours employees will work on their return will be left to the discretion of the business.
It has also been announced that the furlough scheme will close to new entrants on 30th June.
Sunak said: “The furlough and self-employment schemes have been a lifeline for millions of people and businesses.
“Now these schemes will adjust to ensure those who are able to work can do so.”
During June and July the furlough scheme will remain unchanged, but from August onwards, business will increasingly have to contribute to wages.
Starting in August, employers will be responsible for paying National Insurance (NICs) and pension contributions – representing 5% of employment costs – and from September, the government’s wage contribution will drop to 70% of wages up to a new cap of £2,187.50.
Then, from October, the contribution will fall again to 60% of wages up to £1,875. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
Mike Cherry of the Federation of Small Businesses (FSB) said: “Small firms have long been the backbone of the UK economy and these policies will help keep it that way. Keeping the self-employed and those who work in a small business attached to the labour market is crucial to prevent scarring of the economy.”
Around 40% of employers have not made a claim for employer NICs costs or employer pension contributions and so will be unaffected by the change in August if employment patterns do not change.