Furlough scheme changes from August 2020

The Coronavirus Job Retention Scheme (CJRS) has provided a vital lifeline for businesses, but the government is now beginning to taper the support as the economy reopens. From August 2020, the scheme enters a new phase, requiring employers to start contributing to the costs of their furloughed employees.

Understanding these changes is crucial for cash flow planning and making decisions about the future of your workforce.

The introduction of employer contributions

In August 2020, the government will continue to pay 80% of wages up to the £2,500 cap. However, employers will no longer receive a grant to cover the associated employer National Insurance contributions (ER NICs) and minimum automatic enrolment pension contributions. Employers must fund these costs themselves.

In September 2020, the government grant will reduce to 70% of wages, capped at £2,187.50. Employers must top up the remaining 10% to ensure the employee still receives 80% of their normal pay (subject to the £2,500 cap). In October 2020, the government grant will reduce further to 60%, capped at £1,875, with employers required to contribute 20%.

Flexible furloughing

Since 1 July 2020, employers have had the flexibility to bring furloughed employees back to work on a part-time basis. Under 'flexible furlough', employers pay the employee in full for the hours they work, and claim the CJRS grant for the normal hours they do not work. This provides a valuable mechanism for businesses to slowly increase capacity as demand returns, without committing to full payroll costs immediately.

Looking ahead to the scheme's closure

The CJRS is scheduled to close entirely on 31 October 2020. Employers must use the intervening months to assess their long-term staffing requirements. If redundancies are necessary, employers must factor in the statutory notice periods and consultation requirements, ensuring that all legal obligations are met during this challenging transition.