Coronavirus Job Retention Scheme – furlough is changing in the UK
As has become something of a habit, the Chancellor of the Exchequer, Rishi Sunak, chose Friday evening (29 May 2020) to announce further changes to the Coronavirus Job Retention Scheme (the Scheme). The headline changes that have been announced (with further detail expected on 12 June 2020) include the tapering and ultimate closing of the Scheme, an end to new entrants joining the scheme, flexible furloughing, and a reduction in the government’s contribution to wage costs.
So what do we know?
- The Scheme remains unchanged for June and July 2020 but will begin to taper from 1 August 2020 onwards, closing entirely on 31 October 2020.
- There can be no new entrants to the Scheme after 30 June 2020, meaning that the latest that employers can place employees on furlough for the first time will be 10 June 2020.
- Furloughing is becoming flexible. From 1 July 2020 (a month earlier than previously planned), employers may choose to place employees on furlough part-time and work part-time. For the time on furlough, the employer can reclaim wage costs under the Scheme; for any time spent working, the employer will be responsible for all pay. Employers considering implementing the new flexible furlough arrangement may need to revisit their furlough agreement with the employees concerned (which we would expect to specify that furlough will be for a minimum three week period, during which the employee is prohibited from undertaking any work), and either issue a new agreement or a variation letter which details the new arrangement.
- The government’s contribution to wage costs will begin to reduce as follows:
- From 1 August - Employers will have to pay employees’ national insurance and pension contributions (and will no longer be able to reclaim them through the Scheme). Employers will still be able to reclaim 80% of employees’ wage costs (up to a maximum of £2500 per month) until the end of August 2020.
- From 1 September 2020 - Employers can only reclaim 70% of wages from the Scheme (up to a maximum of £2,190). Employers will then be required to top up pay (either to 80% or more, depending on what was agreed between the employer and employee).
- From 1 October 2020 - the government reimbursement will further reduce to 60% of pay (up to a maximum of £1,875), again with employers being required to top up.
Whilst we await further details, expected on 12 June 2020, employers will need to act swiftly to place any further employees on furlough as the deadline to do so is fast approaching. Employers wanting to take a more flexible approach to furloughing will need to consider the terms of existing furlough agreements and issue variations where needed. Employers should now also be reviewing their wider business plans and considering the needs of the business going forward, with the knowledge that the Scheme is to reduce and will come to an end on 31 October 2020.