Furlough: New rules to kick in next week – how these could affect people using the scheme

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Furlough, formally known as the Coronavirus Job Retention Scheme, has affected over nine million people in the UK. The scheme was introduced by the Chancellor of the Exchequer, Rishi Sunak, as part of government assistance designed to offer Britons a helping hand. Under the original rules, the government was required to meet 80 percent of a person’s salary up to a limit of £2,500.

To help ease the burden on employers, the government also agreed to cover the cost of National Insurance and pension contributions.

Although the first plans laid out by the Chancellor said furlough would finish at the end of June, the scheme was given an additional extension.

The government stated it realised the severe impact COVID-19 was having on businesses and British life, and would carry the scheme on until October.

This has allowed employers to focus on keeping their business going amid the difficult financial circumstances being faced by many.

However, as the scheme winds down, there are important changes to bear in mind affecting those who use furlough.

In September, for the first time throughout the scheme, the government grant will decrease.

While previously the government grant has stood at 80 percent of wages up to £2,500, this will drop to 70 percent up to £2,187.50.

This will mean employers are required to take on additional financial responsibilities.

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Although in August, employers were required to pay National Insurance and pension contributions, September ushers in significant change.

Employers will now be required to meet 10 percent of wages up to £312.50 per month.

Thankfully, though, this will still mean employees receive 80 percent of their salary up to £2,500 per month, but from both the government and their employer.

There are, however, concerns the increased financial responsibilities for companies could bring about redundancies. 

In May, the Institute of Directors (IoD) said a quarter of members using the furlough scheme could go bust if forced to make any contribution at all to furlough wages.

September, then, is likely to prove a moment of reckoning for many companies. 

There have, however, been calls for the government to extend the scheme beyond the October end date.

Some have suggested further financial support is necessary, particularly for industries harshly affected by the crisis.

However, the government has resisted demands and stated the scheme must draw to a close.

Speaking in his summer statement, Mr Sunak said: “Furlough has been a lifeline for millions supporting people and businesses to protect jobs, but it cannot, and should not, go on forever.

“I know that when furlough ends it will be a difficult moment. I’m also sure that if I say the scheme must end in October, critics will say it should end in November. If I say it should end in November, critics will just say December.

“But the truth is, calling for endless extensions to the furlough is just as irresponsible as it would have been back in June to end the scheme overnight.

“We have to be honest. Leaving the furlough scheme open forever gives people false hope that it will always be possible to return to the jobs they had before.”

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