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Get ready for fresh wave of furlough changes!

28th Aug 2020
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Ah furlough, can’t live with it, can’t live without it. This is especially true as of next week due to the new wave of changes to the furlough scheme that will come into effect and, well, let’s just say it’s not good news.  

Yes, from September 1st the Treasury’s contributions to the furlough payments will decrease from 80% to 70% per employee. This will be the first time the government has scaled back its contributions since the introduction of the scheme back in March. This means that employers will now have to pay a minimum of 10% of their employees’ wages which would bring the workers’ total monthly earning to 80% of their salary. 

Up until now, as we all know, the government paid the full 80% and if businesses were able to, they could choose to top up the remaining 20%. The 80% contribution from the government was capped at £2,500 per employee per month. But come September, with the contribution reduced to 70%, this will be to the value of £2,187.50. 

So what does this mean for you? Well, as an employer you are legally obligated to foot the 10% plus employer national insurance and pension contributions on top. If you do not, then you are no longer eligible for the scheme.  

Fortunately, for any business that keeps employees on until the end of January 2021, who are earning at least £520 a month, they will receive an additional £1,000 bonus per staff member. Hopefully, this will be an incentive to keep staff on despite not being at full trading capacity. 

If you are an employee then I’m afraid the outlook is a bit more sobering. There are no cash incentives for employees to return from furlough and they are pretty much at the whim of their employers.  

On top of this, if you were previously receiving a 20% top up from your employer then you may be in for a pay cut as employers will be looking to save money where possible. This is because with the introduction of the mandatory 10% contribution for employers, many businesses will simply not be able to cover this for all staff.  

But to be honest, either way, anyone who does return from furlough will be the lucky ones. Unemployment and redundancies are forecasted to increase dramatically come September as businesses will struggle to maintain pre-Covid staff levels. This is not helped by the fact that in October, the government contribution will be reduced to 60% and employers will have to pay 20% of staff wages up to a cap of £1,875 per employee per month. 

Apologies for all the doom and gloom but sometimes it’s best to face the facts head on and call a spade a spade. In this case, it’s a burning dumpster fire. With the Tories not budging on extending furlough (despite nearly every major European superpower doing so - but that’s none of my business *sips tea*) it seems as if we have to once again prepare for the worst and hope for the best! 

Want to find out more about upcoming changes to the Coronavirus Job Retention Scheme? Register now for BrightPay's free webinar where we look at flexible furlough, what you need to know about the wind-sown timeline, and changes to making a CJRS claim. Book your place here

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Aoibheann Byrne

 

Written by Aoibheann Byrne
BrightPay Payroll Software