Changes to the furlough scheme - what you need to know

From August 1st, the Coronavirus Job Retention Scheme (CJRS) has started to wind-down – but what does this mean for your business and any staff you might have furloughed or want to bring back?


Furlough state of play – what’s changed?

Furlough definition

Companies will now have to start paying the pension contributions and national insurance contributions (NICs) for all their furloughed staff and from September 1st will have to contribute 10% of their wages and 20% from October 1st. 

 

The scheme is scheduled to terminate in full on Halloween – October 31st 2020 – when businesses will either have to bring their employees back to work on normal hours, reduce their hours or terminate their employment. 

 

The cost is estimated to be about 5% of pre-furloughed pay for businesses. 

 

The Resolution Foundation have estimated that while at its peak, the CJRS paid for nine million UK workers, more than half of these have now returned to work in some capacity. It’s estimated that approx. 3 to 4.5 million workers remain furloughed. 

 

They say that changes to the scheme now in motion will cost employers an average of £70 per month per employee – equivalent to 5% of the average employee’s wage before the coronavirus pandemic and lockdown was implemented. 

 

Some sectors remain worse affected than others. The research indicates that some 43% of workers in the leisure industry; 37% in hospitality and 24% in transport and storage were still furloughed until last week.

 

The Resolution Foundation are among others arguing for a targeted extension of the furlough scheme to these sectors as they are disproportionately struggling.  

 

Other changes coming into effect from August 1st now mean that it’s down to the discretion of the employer whether or not it’s safe for an employee to return to work. 

 

Government guidance has changed to reflect the new advice based on whether employers, in consultation with workers, consider home working to continue to be viable. 

 

It should also take account of their personal circumstances including use of public transport, childcare responsibilities, protected characteristics and other factors including whether the individual is in a high risk group.

 

The reopening of bowling alleys, nightclubs, soft play areas and weddings was also put back by two weeks and the effects of local lockdowns in Greater Manchester and West Yorkshire will also be detrimental to businesses in those places. 

 

UKHospitality – the trade body for the industry – estimates that as many as half a million jobs could be at risk in the sector without a firm reopening date or schedule and this could rise in the wider leisure sector. 

 

Katie Nicholls, chief executive of UKHospitality said: “With prolonged uncertainty and no change on the furlough scheme as a result of a pause in reopening and any knock-on effect on consumer confidence.”

 

Businesses will be eligible for £1,000 pay off per furloughed employee brought back into the company and still employed at the end of January 2021 but some think even this won’t be enough to offset further job losses in some sectors. 

 

Andrew Marshall, director-general of the British Chambers of Commerce said: “Furlough has cushioned the blow, but when it ends we will see significant job losses and many insolvencies.”

 

Anybody hoping for an official change of heart would have been disappointed as Andrew Bailey, Governor of the Bank of England agreed with the Chancellor.

 

He said: “It’s (CJRS) been a very successful scheme, but he’s right to say we have to look forward now. I don’t think we should be locking the economy down in a state that it pre-existed in”. 

 

Like dropping a stone into a muddy pond, things are gradually becoming clearer but not by much. 

 

The Coronavirus Job Retention Scheme only has 88 days left to run and many companies and sectors won’t be at anything like capacity by then before the build-up to the Christmas season begins. 

 

This could be the best time to get some expert advice about where your business goes next. 

 

You can get in touch with us today to arrange a convenient, free, virtual initial consultation at a time and date of your choosing. We can go through the situation your business is facing and set out your short, medium and long-term priorities. 

 

Our expert advisors will work with you to see if they’re achievable and what the best and most efficient ways of reaching them will be.

 

A plan to survive right now can easily become a plan to expand and thrive in 2021 but only if you start working on it right now. 

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