The Coronavirus Job Retention Scheme (also known as the “furlough scheme”) has been in operation since April 2020, as part of the United Kingdom government’s response to the COVID-19 pandemic. The scheme has enabled employers across the UK to retain their employees and protect jobs preventing unemployment and mass redundancies or reductions in force.
The level of grant under the scheme is being tapered until 30 September 2021, when it is due to end. From 1 July 2021, the level of government grant will reduce and the amount of contribution from employers towards the cost of furloughed employees’ wages will increase. Prior to 1 July 2021, employers were not required to contribute to furloughed employees’ wages—the government grant covered 80 percent of an employee’s usual salary for hours not worked (although employers could choose to top up employees’ pay to 100 percent).
From 1 July 2021, employers must pay 10 percent towards employees’ wages in addition to the employer National Insurance contributions and pension contributions. Beginning 1 August 2021, the employer contribution will increase to 20 percent.
The government guidance states that employers will be required to top up an employee’s wages to ensure employees continue to receive 80 percent of their usual wages (up to a maximum of £2,500 a month) in total for the hours the employee is on furlough.
The table below summarises the information included in the government guidance. It shows the changes in the level of government contribution and the new required employer contribution each month, up until 30 September 2021. It also shows the amount that the employee receives per month where the employee is furloughed 100 percent of the time.
|Effective date||1 June 2021||1 July 2021||1 August 2021||1 September 2021|
|Government contribution: wages for hours not worked||80 percent up to £2,500||70 percent up to £2,187.50||60 percent up to £1,875||60 percent up to £1,875|
|Employer contribution: employer National Insurance contributions and pension contributions||Yes||Yes||Yes||Yes|
|Employer contribution: wages for hours not worked||No||10 percent up to £312.50||20 percent up to £625||20 percent up to £625|
|For hours not worked employee receives||80 percent up to £2,500 per month||80 percent up to £2,500 per month||80 percent up to £2,500 per month||80 percent up to £2,500 per month|
Employers can continue to choose to top up employees’ wages above the 80 percent total and £2,500 cap for the hours the employee is on furlough at their own expense.
Ogletree Deakins will continue to monitor and report on developments with respect to the COVID-19 pandemic and will post updates in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available. Important information for employers is also available via the firm’s webinar programs.