The Chancellor Rishi Sunak has announced the Government’s Coronavirus Job Retention Scheme will be extended by a further 5 months from 30th April to 30th September 2021.
The key points are as follows:
- The scheme has been extended from 30th April to 30th June 2021, with no other changes being made to the scheme during this period.
- From 1st July 2021 to 30th September 2021, employers will be required to share some of the costs.
Under the Coronavirus Job Retention Scheme, workers who are furloughed are entitled to 80% of their normal wages, capped at £2,500 per month. Since mid-2020, businesses have been permitted to operate flexible furlough i.e. furlough a worker part-time and required them to work part-time.
At present the Government covers the entire furlough payment, which businesses can reclaim through an online portal, although employers are still required to pay employer national insurance and statutory pension contributions.
This extension comes with similar measures announced by the Chancellor in mid-2020, when he previously extended the scheme to October 2020 and envisaged a return to normality. From July 2021, employers will be required to pay 10% of the furlough costs, increasing to 20% in August and September 2021. These costs to employers will be in addition to the national insurance and pension contributions.
Mr Sunak’s announcement will be welcomed by many businesses in the same way previous extensions to the Coronavirus Job Retention Scheme were made, especially for those who were contemplating the possibility of commencing redundancy consultations.
However, it is clear the Government is starting to look ahead to life after COVID-19. Changes to the furlough scheme will be coming into effect from 1st July 2021, as well as the country gradually coming out of lockdown, and therefore businesses will need to review arrangements for those who are furloughed, to plan whether there needs to be any redundancies or restructures, as well as deciding how to reintegrate furloughed employees back into work.
The scale of the challenge facing employers is significant, with recent figures from HMRC showing that 4.7 million jobs in the UK economy were paid for by the Government under the Coronavirus Job Retention Scheme, with the scheme to date costing billions of pounds.
It is clear the scheme has avoided millions of redundancies, but the question for employers now is how to get back to some form of normality in the next couple of months.