Furlough Scheme Update

By Rachel Davis

Principal Associate

The Chancellor has announced reforms to the Coronavirus Job Retention Scheme (CJRS) in order to ensure that as the lockdown rules ease and the economy begins to reopen those who are able to work can do so.

The Scheme, which was originally intended to last until the end of July 2020, has been extended until the end of October 2020.

10 June 2020 will be the last day that employers can place new entrants to the Scheme on furlough leave.

During June and July, the government will continue to pay 80% of furloughed employees’ salaries, plus national insurance and pension contributions.

From 1 July, businesses using the furlough scheme will be able to bring furloughed employees back part-time. Employees will then be able to work part-time and be furloughed part-time. Businesses will decide how that will work in terms of the time split.

From August to October, employees on furlough will continue to receive 80% of their salary, but who pays for that will change slightly. The amount the government pays will be reduced each month, with employers expected to contribute towards furloughed employees’ employment costs. 

From 1 August, the government will reimburse 80% of wages, up to a cap of £2,500 per month. However, employers will have to pay employee’s national insurance contributions and pension contributions and can no longer reclaim them through the CJRS.

From 1 September, the government will reimburse 70% of salary (up to a maximum of £2,190). Employers are required to pay national insurance and pension contributions and top-up salaries to 80% up to a cap of £2,500 per month (or more, depending on what the employer has agreed with the employee).

From 1 October, the government will only reimburse 60% of salary (up to a maximum of £1,875), and employers will continue having to pay national insurance and pension contributions and top up salaries to 80% up to a cap of £2,500 per month (or more).

The furlough scheme will close on 31 October 2020 as previously announced.

The self-employed income support scheme (SEISS) is also being extended, with applications opening in August for a second and final grant to cover the months of June, July and August. There will be parity with the reducing furlough scheme, paying 70% of average monthly trading profits up to £6,750.