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The UK government’s Job Retention Scheme, which pays towards the wages of staff on furlough during the coronavirus pandemic, enters a new phase on 1 September 2020.
The government contribution will to fall from 80% to 70% of an employee's wages up to a cap of £2,187.50 per month for the hours the employee is on furlough. The rules allow for employees to be brought back on a part-time basis, with employers paying their wages for the hours worked.
As the government contribution to furlough payments falls, employers will be required to top-up employees’ wages to ensure they continue to receive 80% of their wages up to a cap of £2,500 per month if they are on full-time furlough. Employers will therefore need to pay £312.50 in wage top-ups per employee in such instances.
Employers also have to pay employer National Insurance Contributions (NICs) and employer pension contributions, a change introduced on 1 August.
Employees are required to pay tax, NICs and pension contributions on the money they receive through the furlough scheme.
In October, the government's contribution will fall further to 60% of wages up to a cap of £1,875 for the hours the employee is on furlough, with employers making up the difference to the £2,500 monthly maximum. The employer contribution to wages will then be £625 a head.
Over 9.4 million jobs are furloughed on behalf of 1.14 million employers. The scheme has so far cost over £34 billion.
The scheme is scheduled to close on 31 October, although there are concerns that its demise will trigger widespread redundancies. Employers will begin to feel the strain as their required contributions increase on 1 September.
The government has introduced a law requiring firms to calculate redundancy payments on full earnings, not reduced furlough wages.
Job Retention Bonus
The government has announced a Job Retention Bonus to encourage firms to retain staff who have been brought back to work from furlough.
Payments of £1,000 will be made for each returned furloughed employee who remains employed from November through to the end of January 2021.
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August 28, 2020 at 11:43PM
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Furlough Changes In September: Govt Reducing Support, Employers To Pay More - Forbes
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