Changes to furlough scheme on Thursday
Business / Mon 28th Jun 2021 at 01:31pm
BUSINESSES across Britain will have to start making compulsory furlough contributions from this week as the Treasury’s pay falls to 70% for the first time this year reports the Mirror.
The wind down comes as tens of thousands of businesses were given the green light to trade again, although venues such as nightclubs and theatres remain in limbo.
On July 1, government contributions will drop from 80% to 70%.
That means staff still on furlough will receive 70% of their pay from the Treasury – up to £2,187.50 – and 10% of their income plus pension and National Insurance contributions from their employer.
The government currently contributes 80% of pay up to £2,500 a month – and firms can top this up to 100% if they can afford to do so.
From August, the support will fall even further – with firms asked to contribute 20% of 80% pay plus tax and pension contributions on top.
However, workers who remain on furlough – either part time or full time – should not see their pay affected.
That’s because pay for furloughed employees must remain at a minimum of 80% at a cap of £2,500. The changes mean your employer will have to top up to the extra 10% – which means up to £312.50 from their own pocket.
Those on flexible furlough, will be paid in full by their employer for the hours they work, and the grant will cover 70% of pay for their unworked hours, subject to a cap which is less than £2,187.50.
From August 1, 2021, until the scheme ends, the Government’s grant will reduce a final time to 60% of furloughed employees’ wages for their unworked hours at a cap of £1,875.
With the 80% rule still intact, that means employers will need to contribute 20% to staff wages up to £625.
Employment expert Pam Loch at Loch Solicitors said: “Employers will need to consider how they can accommodate the upcoming changes.
“Employers can still choose to ‘top up’ the furlough payments. Employees can be fully or flexibly furloughed so they can work part time and be paid their usual wages for the hours worked until the scheme ends on 30 September 2021.
“However from 1 July, 2021 the furlough grant reduces in stages as employers are required to contribute towards the cost of furloughed employees’ wages. This could be a trigger for employers thinking about making redundancies.”
Experts have already raised concerns that the closure of the scheme could put thousands of jobs at risk.
According to latest Government figures, the number of employees on furlough stood at 3.4million at the end of April.
But delays to the end of lockdown has put further pressure on business – many of whom remain closed or are unable to operate at full capacity due to social distancing restrictions.
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