Furlough wind down timescales

The Coronavirus Job Retention Scheme has been hugely popular and will continue to support jobs until the end of October, however, from 1st July, many changes were made to the scheme.

The government’s furlough scheme will wind down in upcoming months, employers will need to contribute to employees’ wages and the Coronavirus Job Retention Scheme will end fully at the end of October.

Before August, employers could claim 80% of a furloughed employee’s wage costs, to a monthly maximum of £2,500. The government also refunded employer NICs and auto-enrolment pension contributions on this sum.

Going forward, the level of grant will be reduced each month. Employers will have to start contributing to the wage costs of paying their furloughed staff, and this employer contribution will gradually increase in September and October.

• In August, the government will continue to pay 80% of wages up to a cap of £2,500, but employers are now required to pay employer National Insurance contributions and employer pension contributions. For the average claim, this represents 5% of the gross employment costs that they would have incurred if the employee had not been furloughed.

• For September, 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 need to pay employer NI contributions and employer pension contributions plus 10% of wages to make up 80% of the total, up to a cap of £2,500.

• In October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will need to pay employer NI contributions and employer pension contributions plus 20% of wages to make up 80% of the total, up to a cap of £2,500.

Employers will continue to be able to choose to top up employee wages above the 80% total and £2,500 cap for the hours not worked at their own expense if they wish. Employers will have to pay their employees for the hours worked.

After 31st October, the government contributions will finish and the scheme will come to an end.

When the scheme was extended until October, employers were promised that they would not face a ‘cliff-edge’ withdrawal of funding and that the scheme would be wound down gradually. The wind-down phase of the furlough scheme is more generous than many had expected, with most furloughed employee wage costs still being met by the government over the coming months. Depending on how the re-opening of businesses progresses, this approach may give some employers time to rebuild and save jobs that would otherwise have been lost.

Job Retention Bonus Scheme

During last month’s summer economic update, the chancellor announced that although the scheme will end at the end of October, all businesses can avail of a Job Retention Bonus Scheme for each employee they bring back from furlough. This is a one-off payment of £1,000 to employers that have used the Coronavirus Job Retention Scheme for each furloughed employee who remains continuously employed until 31‌‌‌ ‌January 2021.

To be eligible, employees will need to earn at least an average of £520 per month for November, December and January, they must have been furloughed at any point and legitimately claimed for under the Coronavirus Job Retention Scheme, and they must have been continuously employed up until at least 31‌‌‌ ‌January 2021.

Employers will be able to claim the bonus from February 2021 once accurate RTI data to 31‌‌‌ ‌January has been received.

How BrightPay can help? 

BrightPay software is being continually updated to ensure you can adapt your processes to all the upcoming changes regarding furlough. 

If you’re not already using BrightPay, why not book a demo or download BrightPay’s free 60 day trial? One of our payroll experts will show you its clear and easy to use interface and talk you through its underlying comprehensive set of payroll functionality.

Posted byZoe ColverinCoronavirus