Employers

Extended Coronavirus Job Retention Scheme

Coronavirus Job Retention Scheme (‘The Furlough Scheme’)

Updated: 11 Jun 2021
From 01 July, government contributions to the Coronavirus Job Retention Scheme will reduce from 80% to 70% and employers will be expected to contribute 10% of wages. Here is a reminder of how the scheme works and current timetable for it to wind down.

The government’s Coronavirus Job Retention Scheme, commonly referred to as ‘furlough’, has been extended into September 2021 and will operate as the existing scheme.

The Coronavirus Job Retention Scheme (‘Furlough Scheme’) – a reminder

The government’s Coronavirus Job Retention Scheme, commonly referred to as ‘furlough’, was extended in March 2021 and runs into September 2021

The extended furlough scheme provides employers with the same support as previous schemes:

  • Government support for up to 80% of employee wages up to a limit of £2,500 per person
  • Employees may be ‘full time furloughed’ or furloughed flexibly in line with the employers’ requirements to staff their organisation in line with demand
  • Employers must continue to pay the employer National Insurance Contributions and workplace pension contributions in respect of any hours each employee works

Unwinding Furlough: how the scheme will be phased out

From 01 July 2021, employers’ contributions will increase. The published timetable of contribution changes is as follows:

  • Until 30 June 2021: employers can continue to claim up to 80% of wages, capped at £2,500 per employee
  • From 01 July 2021: government contributions will reduce to 70% of wages, capped at £2,187.50 per employee. Employers will have to pay 10% of wages, thus making up the difference, bringing the total to 80% of wages (capped at £2,500 per employee)
  • From 01 August 2021: government contributions will reduce to 60% of wages, capped at £1,875.00 per employee. Employers will have to pay 20% of wages, thus making up the difference, bringing the total to 80% of wages (capped at £2,500 per employee)
  • 30 September 2021: scheme closes

Understanding employer eligibility

Employers must:

  • Have a UK bank account and a UK PAYE scheme
  • Not use the scheme if they are a publicly funded organisation. Per the previous scheme, government expects such organisations not to use the scheme although those that are partly public funded may be eligible where private revenues have been disrupted
  • Report each employee’s hours worked and the usual hours each would expect to have worked in any given claim period
  • Seek the agreement of each employee who is currently not furloughed before furloughing them under this scheme, which should be recorded in writing and retained for the specified time periods
  • For the remainder of the extended Furlough scheme, employers must continue to pay National Insurance Contributions and pension contributions

Understanding employee eligibility

Employees:

  • Are eligible provided they have been on their employer’s PAYE payroll between 20 Mar 2020 and 2nd March 2021
  • Can be on any type of contract
  • Will have any grant based on the hours they are not working calculated in reference to their usual working hours where they have previously not been furloughed and any grant for those who have been previously furloughed based on their salary as at the pay reference period
  • Must be furloughed for a minimum period of 7 days when they are subsidised under this scheme
  • Will be paid by their employer subject to their contact of employment and their employer will be responsible for paying tax and National Insurance Contributions on those amounts

What does the Coronavirus Job Retention Scheme grant cover?

The Coronavirus Job Retention Scheme operates as follows:

  • For hours not worked by an employee, the government will pay a given percentage of each employee’s pay as indicated in the timeline above. This grant must be paid to employees in full
  • There is no limit on the number of employees covered by the furlough scheme extension in place
  • The scheme covers businesses that are open and wish to furlough employees and businesses who must remain closed
  • Government grants under this scheme do not cover Class 1 Employer NICs or pension contributions – these remain payable by the employer for the hours worked by each employee
  • Employers may choose to top up employee wages above the scheme grant limits at their own expense
  • There is no gap in eligibility for support between the previous end date to the furlough scheme and the extension to it
  • Employers can rehire employees that have been made redundant since 23 Sep in order that they can continue to benefit from the furlough grant
  • Employees who have been asked to shield due to extreme vulnerability should either work from home or, if this is not possible, they should not go to work. They may be eligible for Statutory Sick Pay and will receive communication from the government with further guidance

Summary

Full information is available on the government’s official website page for the Coronavirus Job Retention Scheme.

This article is based on our understanding and interpretation (as of 11 Jun 2021) of the official government information for the Coronavirus Job Retention Scheme as announced in the Budget.

We want to keep you in the picture: if you have any questions about the furlough scheme and how it applies to your business, please contact us and a colleague will be happy to help you.