Changes to the furlough scheme explained

Are you up to speed with the latest changes? Here’s our guide to what’s happening and how it will affect your business.

Before I get into the detail, there’s a matter of some urgency to mention: if you’re considering furloughing someone who has not been furloughed yet, the clock is ticking. After 1 July, you’ll only be able to furlough staff who have already been furloughed for at least three weeks, which means that the last possible date you can furlough a new entrant to the scheme is TODAY - 10 June. 

In addition, after 1 July, the maximum number of employees you can claim for in any period cannot be higher than the maximum number you have claimed for in a previous period. Or to put it another way, if your highest single claim for any period up to 30 June was, say, for 100 people, you can’t claim for more than 100 in later periods.

The above are just a couple of the changes that have been unveiled by the chancellor, and it’s obviously worth getting to grips with the detail as it will have an impact on your business. 

Looking ahead

Currently, the scheme covers 80% of wages plus National Insurance and pension contributions. This will continue through June and July, up to a cap of £2500 of wages and auto enrolment minimums. 

In August, the scheme will still cover 80% of wages, but the employer will be responsible for the NI and pension contributions. 

Moving into September, the government will pay 70% of wages (which is in effect a cap of £2,187.50) and the employer will need to pay the 10% shortfall plus NI and pension contributions. As before, you are welcome – if able – to pay over and above this amount to give the employee 100% of their wages.

In October, the government’s contribution will fall again to 60% (so a cap of £1,875) and you, as the employer, will need to pay the remaining 20% of wages and NI and pension contributions. 

On the face of it, all of the above seems reasonable. It’s been a vitally important scheme and it’s one that I applaud, but the changes are going to hit some businesses very hard indeed. Some of our clients here at Business Control are bars and restaurants and they have had no revenue at all during lockdown. Where are they going to find those payroll costs? It’s going to be difficult for these companies.

Flexible furlough

Another change brought in by the government is the introduction of flexibility – you’ll now be able to bring employees back into work from furlough on a part time basis. 

The way this will work is that you, as the employer, will pay for their time at work (at 100% of their usual rate), while the government will fund the time they are at home. So, for example, if someone usually works a five-day week, they could be furloughed for two of these days and work for three days. For the two days at home, they’d be paid at the standard furlough rates – gradually decreasing as we go through the months, as above – and you’d pay them at full rate for the other three days.

There’ll be more detail on this revealed in the coming weeks, but it’s also worth noting that this furlough scheme will be coming to an end on 31 October 2020. 

As I’m sure you’re aware, this is when reality will bite for many businesses. You’ll need to have decided by then who to bring back to work and if any of your team will need to be made redundant. 

My bottom line

Over the last few months, the furlough scheme has provided many business owners with a lifeline. Other lifelines have been made available in the form of Bounce Back Loans (the system for which is working quite well, I’m told) and unprecedented grants. We’re about to head into a new phase of this crisis now and, if you’ve not done so already, it’s worth putting a pragmatic, workable plan in place for how you will navigate it. Ultimately, I’m hopeful and I feel that if we all work like hell and create positive opportunities between us in our local business community, we can set the tone for a wider recovery. 

More resources

On 12 June, the government will publish full guidance on all the scheme changes on the GOV.UK site – search for 'Coronavirus Job Retention Scheme' to find this online. 

Don’t forget to check out the rest of our Accounting for COVID-19 blogs here, and please check back periodically to get the very latest insight and information from the Business Control team.

Better still, you can access a whole host of resources for business owners including blogs, smart guides and infographics for free. Simply opt in here.