Employers must move quickly to place employees on the government’s furlough scheme before it closes to new entrants
Today is the last day employers can place employees on furlough who have so far not been on the government’s job retention scheme.
Last month, chancellor Rishi Sunak announced plans to ‘ease back’ the furlough scheme. From 1 July onwards, furlough will be restricted to employees whose employers have already made a Coronavirus Job Retention Scheme claim.
This means the last three-week furlough period for new entrants has to commence on Wednesday 10 June, which could mean a spike as employers ensure as many staff as possible are eligible for part-time furloughing.
The only exception is employees who return to work from maternity and paternity leave after 10 June – Sunak announced yesterday that they could still be furloughed in future as long as their employer is already registered in the CJRS.
Employers will have to share more of the cost, paying employers’ national insurance and pension contributions from 1 August.
“What will make a difference is that employers now know they can bring people back part-time, so there’s some flexibility on how they use it,” said Alison Loveday, partner at law firm Kennedys.
Even if employers do not keep those employees on furlough beyond the end of June, it could be worthwhile registering them for the scheme as it provides organisations with some flexibility in the summer months, she added.
“Employers know they can use the part-time option to get employees who may have been away for a while re-acquainted with work,” she said.
From July to October, employers that are registered for the scheme can bring furloughed employees back part-time.
Through June and July, the government will continue to cover 80% of furloughed employees’ wages up to a cap of £2,500 – from August, the government payments will be the same as before, but employers must cover national insurance and pension contributions.
From September, the government’s contribution to wages will fall to 70%, with a cap of £2,187.50, while employers must continue to pay NICs and pension contributions, as well as 10% of wages up to the £2,500 cap.
In October this falls to 60% of wages, with the employer increasing its payment to 20%, alongside NICs and pension payments.
When the changes to the scheme were announced last month, director-general of the CBI Carolyn Fairbairn said that employers understood that the “the scheme must close to new entrants at some point and that those using it in future will need to make a contribution to help manage the costs”.
“However, previously viable firms not able to open until later, particularly in leisure, hospitality and the creative industries, may need further assistance in the coming months,” she added.
Employers for which the furlough scheme has not been able to prevent redundancies will also have one eye on the time periods required for collective consultation.
The Institute of Directors revealed last month that almost a quarter of company directors it surveyed would not be able to afford the 20% payments they will need to make from October, so will face “difficult decisions” about redundancies.
Those looking to make more than 100 people redundant will need to consult for at least 45 days. If furlough support finishes at the end of October and organisations are looking to lay staff off after that, consultations will need to begin by mid-September at the latest.
Kathryn Dooks, employment partner at law firm Kemp Little, said the vast majority of employers who needed to have already furloughed staff.
“However there may be some employers who want to benefit from the additional flexibility being provided from July (with employees being able to work part-time), so there may be some additional take up by 10 June in order to enable this.
“Most employers who are currently contemplating redundancies are doing so in the light of longer-term economic uncertainty; they do not anticipate a return to normal trading by the end of October when the government support is due to end. For this reason, most employers we are speaking to are contemplating redundancies, rather than any further use of the Coronavirus Job Retention Scheme.”
It is understood that employers will have until 31 July to make furlough claims to HMRC relating to the period to 30 June.
This article was originally published on 1 June and updated 10 June 2020.
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