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UPDATE: Coronavirus Job Retention Scheme (Furlough)

Jun 17 2021

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In light of yesterday’s announcement of 14 June 2021 that full lockdown easing is to be delayed until at least 19 July 2021, we provide an overview of the current employment situation and those utilisingthe Coronavirus Job Retention Scheme (Furlough scheme). It is clear that businesses will have been disappointed by the announcement. From a timing perspective, the Furlough scheme and business rate relief are due to reduce from 30 June 2021 despite the delay and this creates a challenge to balance difficult business decisions against sustainability.

 Current status

The now longer than planned scheme currently allows businesses to claim 80% of an employee's usual salary for hours not worked (i.e. the hours the employee is on furlough), up to a maximum of £2,500 per month. Employers remain responsible for paying employer national insurance contributions and pension costs. Furlough grants for employers have previously been announced as reducing from 1 July 2021.

Essentially, employers will need to contribute more after this date to keep their employees on Furlough. These are 10% in July 2021 and 20% in August 2021 and September 2021.

Below is a table from the Government website to show the tapering of the scheme.

May June July August September  
Government contribution: wages for hours not worked 80% up to £2,500 80% up to £2,500 70% up to £2,187.50 60% up to £1,875 60% up to £1,875
Employer contribution: employer National Insurance contributions and pension contributions Yes Yes Yes Yes Yes
Employer contribution wages for hours not worked No No 10% up to £312.50 20% up to £625 20% up to £625
For hours not worked employee recieves 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month

Future

Furlough has undergone many changes since its inception and there may yet be further changes given that 19 July 2021 is phrased as ‘at least’ the easing of measures.

What we know currently is that the scheme is due to end on 30 September 2021. As of October 2021, employers will no longer be able to designate employees as being on furlough leave. At the outset, the scheme was deemed a temporary measure, but it has been extended and like many other measures there is a temporary end in sight.

Whilst the roadmap is off course, businesses need to factor in the tapering down of the scheme and the requirement to contribute towards the cost of their furloughed employee's wages. This makes what already were difficult decisions to be made even more difficult given the uncertainty.

As previously stated, the scheme is currently due to end on 30 September 2021. Employers should plan financially for the scheme to end on this date. Whilst the furlough scheme has provided businesses with financial help regarding their employees, many businesses may find themselves in a position where they have not fully recovered by the end of the scheme in September 2021 and further measures will be required. This is particularly prevalent in the retail, hospitality and entertainment sectors.

Options such as short-time working, lay-offs and redundancies will need to be considered at the end of the scheme.

Short-time working and lay-offs are temporary measures that can be implemented to assist the business whilst there is insufficient work, but where an upturn is expected. Caution should be given as to when that upturn manifests and when profitability returns to a sustainable level.

This does involve reducing the number of hours employees work. Whilst there is no limit to how long employers can lay off employees for or place them on short-time working, consideration should be given to employee retention. If employees are laid off or put on short-time working for four weeks in a row or six weeks over thirteen weeks, employees are able to apply for redundancy and claim redundancy pay.

Leading on, long-term measures such as redundancies may be needed where the business does not believe there is sufficient work and the level of work will increase for some time. Redundancy is often the last option but one that is taken for the long-term sustainability of your business.

For any advice and assistance on the above or to receive our redundancy guidance, please contact us at employment@cdsmayfair.com.

Visit our website: www.cdsmayfair.com to see how our expert teams can assist.

This document is for information purposes only and is no substitute for, and should not be interpreted as, legal advice. All content is correct at the time of publishing and we cannot be held responsible for any changes that may occur outside of our control.


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