The furlough scheme started in April 2020, and who knew it would carry on for so long? But there are key changes to furlough from 1 July 2021 which we explain here:
What is furlough?
It’s proper title is the Coronavirus Job Retention Scheme or CJRS.
It was intended to protect employees who would otherwise be made redundant, due to permanent or temporary business closures during the pandemic.
How does it work?
We’ve got lots of blogs on the furlough scheme, but in simple terms:
It was designed to fund 80% of your employees’ gross pay, giving you as the employer the option to top up the remaining 20%.
To start with this 80% also applied to employers’ national insurance and pension contributions, but you’ve had to cover these costs yourself since August 2020.
So what’s changing?
For July 2021:
- The Government (or taxpayer actually) will only cover 70% of your employees’ gross pay.
- The employer still has to pay the 80% of gross pay, and can top up the 20%.
This means that employers have an increased cost from 1 July of 10% of their employees’ gross pay.
From August and September 2021:
- The Government funding will only cover 60% of your employees’ gross pay.
- The employer still has to pay the 80% of gross pay, and can top up the 20%.
- This means that employers have an increased cost from 1 August of 20% of their employees’ gross pay.
Scheme ends:
- The scheme ends on 30 September 2021.
What you need to do:
- Make sure your furlough claims are at the correct level for July (70%) and August/September (60%).
- Consider whether you need to reduce any employee hours or make any redundancies.
- Seek HR advice from an employment law expert. We recommend Sandy Green of The HR Dept.
- Consider completing a business plan and cashflow forecast, to see how these changes impact your cash.
- Book a specialist advice call with Sharon if you’d like some support with your decision making.
