On Friday the 29th of May, the Chancellor, Rishi Sunak, announced some significant changes to the Coronavirus Job Retention Scheme. But what are they and what do employers have to do?
Since the Coronavirus Job Retention Scheme was launched in March, there have been numerous changes and amendments.
Initially set up to run from the beginning of March through to the end of May, the Scheme has been extended twice; until the end of June; and then through to the end of October.
The latest updates, of which there are three, are perhaps the most important as they are likely to significantly impact whether employers choose to continue furloughing employees or make them redundant.
- From July the 1st, the Scheme will be made more flexible to allow employers to bring previously furloughed employees back to work on a part-time basis. They will still be able to receive a grant for the time they are not working.
- On August the 1st, employers will have to start contributing to the wage costs of their furloughed staff. The amount will increase each month up until the end of the Scheme in October.
- The Scheme will also close for new entrants from June the 30th. As a result, employers will have to furlough any new employees no later than June the 10th. This is to allow for the minimum furlough period of three weeks to run its course.
Coronavirus: furloughing employees
Since the Coronavirus Job Retention Scheme was announced earlier this year, many people will have come across the term "furlough" for the very first time. So, what does furloughing employees mean and what do employers have to do? PayFit answers all your questions.
From the beginning of July, any businesses using the Scheme will be able to bring previously furloughed employees back to work on a part-time basis. The Government will continue to pay 80% of wages for any normal hours they do not work.
Employers will be responsible for deciding the hours and shift patterns for their employees and will also pay the wages for the hours worked. This will allow employees to work for as much as or as little as their employers require.
The working hours arrangement must be agreed between the employer and employee and cover at least one week. The employee will also have to have the agreement reached confirmed in writing.
When claiming for the Coronavirus Job Retention Scheme grant for furloughed hours, an employer will need to report and claim for a minimum of a week. If preferred, they can choose to make claims for more extended periods - e.g. two-weekly or monthly cycles.
Employers will also be required to submit data on the usual hours an employee would typically be expected to work in a claim period, as well as the actual hours worked.
If employees are not able to return to work, or employers do not have any work for them to do, then they can remain on furlough, and the employer will still be able to claim the grant for their full hours under the existing rules.
Employer contribution to furlough
The grant provided through the Coronavirus Job Retention Scheme will be gradually reduced from the beginning of August.
While in June and July the Government will pay the 80% of wages up to a cap of £2,500 as well as the employer National Insurance Contributions (NICs) and pension contributions, from August, employers will have to pay the employer NICs and pension contributions.
The Scheme evolves in September too. From then and up until the beginning of October, the Government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will still have to pay the employer NICs and pension contributions as well as 10% of wages to make up 80% of the total wage up to a cap of £2,500.
In October, the Scheme changes for the final time. The Government will be responsible for paying 60% of the wages for furloughed employees, up to a cap of £1,875, for the hours an employee does not work. Employers will continue to pay the employer NICs, pension contributions and now 20% of wages to make up 80%. The cap remains at £2,500.
The cap on the furlough grant will be proportional to the hours that an employee has not worked.
For lots of small employers, some or all of their employer NICs bills are covered by the existing Employment Allowance. In this case, there will be no significant impact as a result of the reduction in the Government’s contribution.
Furthermore, roughly 25% of the Coronavirus Job Retention Scheme’s monthly claims relate to wages that are underneath the threshold where employer NICs and auto enrolment contributions are due. As a result, no employer contribution will be required in August for those furloughed employees who have been affected.
Furlough application deadline
The Scheme will close for new entrants on June the 30th. This means that after this date, employers will only be able to furlough employees who have previously been furloughed for the minimum furlough period (three weeks) before June the 30th.
The final date that an employer can furlough an employee for the first time will be on June the 10th. This is so that the minimum three-week furlough period is completed by the end of the month.
PayFit & employee furloughs
We've updated our app to help customers with any employee furloughs they may choose to implement within their organisation. There is also advice and support regarding what can and cannot be done within the app.
With PayFit, the furlough calculation is done automatically within the app and the reclaimable employer contributions are also automatically calculated for NI and pensions.
What can the PayFit app do?
✅ Provide support on furloughing
✅ Automatically calculate the cost of furlough and the reclaimable employer contributions for NICs and pensions
✅ Provide a report for all pay related to furloughed leave
Interested in finding out more about how PayFit can help support you with your payroll processes? Then why not book a demo with one of our product specialists?