The Chancellor of the Exchequer – Rishi Sunak – has announced that the Coronavirus Job Retention Scheme (furlough scheme), which has helped millions across the UK, is to be extended until the end of September 2021.
What is the furlough scheme?
The furlough scheme was introduced at the beginning of lockdown in March 2020 as a bid to help employers tackle the impact of the on-going Covid-19 pandemic. Currently the furlough scheme pays 80% of an employees’ wages (capped at £2,500 per month pro rata) for the hours they cannot work due to the pandemic.
The scheme has already been extended twice. The last extension was at the beginning of November and was due to end in April. However, sectors that rely most on the furlough scheme will not be able to open by then, for example, gyms, hairdressers and non-essential shops are planned to reopen on 12 April. As such, the Chancellor announced yesterday another extension until the end of September 2021.
What does this mean?
This means that employers can continue to use the furlough scheme until end of September 2021.
Furloughed employees will continue to receive up to 80% of their pay. However, the government contributions will begin to reduce so that: –
- From July, the government will contribute 70% and employers will have to pay 10% for hours not worked; and
- In August and September, the government will pay 60% and employers will have to pay 20% for hours not worked.
Employers will be required to fund 100% of wages for any hours employees do work, as well as all employer National Insurance Contributions (NICs) and pension contributions.
As the Covid-19 restrictions start to lift, employers will consequently have to help cover some of the cost of their furloughed workers’ wages. This is similar to the phasing out of the scheme that took place last summer.
It should be noted that following yesterday’s announcement, the government is also extending the grant for businesses hiring apprentices and support for those who are self-employed until September 2021.
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