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When Does the Furlough Scheme End? What's Next for Employers?

The Coronavirus Job Retention Scheme, which started over a year ago in March of 2020, has been extended to the 30th September 2021 after which it will finally come to an end. Employers will no longer be able to designate employees as on furlough leave after this date. With changes having come into effect to the scheme on the 1st July 2021, and more changes to come in August, what are the next steps and what do employers need to do when the Scheme ends?

 

What is the Furlough Scheme?

The Furlough Scheme was an initiative created by the Government in March 2020, as the ripple effect of COVID-19 forced us all into a lockdown. Employers were put in a difficult position of putting their workers on ‘Furlough’, which meant keeping them on the payroll but not dismissing them.

The Government stepped in and offered a grant to pay 80% of wages for any workers who were furloughed up to a cap of £2,500 per month, which allowed most workers to continue to ride the pandemic out from their homes until things returned to normality.

We have seen several changes and attempts to rescue the situation, with different levels of easing restrictions across the UK, multiple lockdowns, all in a bid to save the country from a collapse and try to get everyone out and back to their usual daily lifestyles. However one thing that had remained constant until now was the Government grant provided for the scheme of 80% of wages for hours not worked. As the impact of COVID has lasted longer than most anticipated, the scheme has been extended as the country has tried to regain some normality.

 

What are the changes?

As of the 1st July 2021, the level of Government grant provided has now been reduced to 70% provided to employers.  Employees will always receive at least 80% of their wages for their furloughed hours, therefore employers themselves must now provide the additional 10% from their own pockets.

Further changes are coming from the 1st August 2021, where the level of grant will be further reduced to 60%, with employers having to contribute 20%, which will stay until the end of September when the scheme comes to its end. To break it down, the below table outlines the figures that employers need to keep in mind over the next few months.

  June July August September
Government contribution: wages for hours not worked 80% up to £2,500 70% up to £2,187.50 60% up to £1,875 60% 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% up to £312.50 20% up to £625 20% up to £625
For hours not worked employee receives 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month 80% up to £2,500 per month

 

*Employers must still continue to pay all employer National Insurance and Pension contributions.

Further information on the changes and updates can be found here.

 

What comes next?

Although the scheme has been extended in the past, there are no signs to indicate that this will be the case this time around, and it is best to consider that 30th September 2021 will be the final end date, and so it is best to plan from now to be prepared.

The furlough scheme has indeed provided businesses with support in keeping majority of their employees on furlough throughout the pandemic, especially those in sectors who have been affect more than others, such as hospitality (primarily the food and accommodation services industries). In 2019, the hospitality sector contributed to roughly 3% of total UK economic output, and the impact of COVID lead to the economic output of this sector down 90% from February 2020 to April 2020. However not all businesses may feel they have fully recovered even at this stage, and with the end of furlough in sight could mean temporary measures need to be put in place in order to take on the responsibility once again of paying full wages to workers. These could include:

  • Changing terms and conditions of employment to reduce contractual entitlements which may include a reduction in the number of hours worked by employees; changes to benefits such as company sick pay; holiday entitlement (in excess of statutory minimum) or even freezing of bonus payments
  • Moving employees onto zero hour contracts dependent on the business and industry
  • Flexible working – whilst this has traditionally been viewed with scepticism, the pandemic crisis has shown employers (and employees) can embrace flexible working
  • Lay-offs and short time working to help stabilise the business
  • Early retirement – although this must be handled with care so as not to give rise to possible age discrimination claims
  • Recruitment freezes and withdrawing of job offers – any offers already made, the withdrawal must be before the new member of staff joins the organisation
  • Redundancies – whilst many businesses would have already gone through this near the beginning of the pandemic crisis and the furlough scheme as not all workers were required to stay on the payroll system, however to help combat a lack of workload to go around, this may be a measure to once again consider – but it is not your only option. 

 

Those businesses who are going to struggle with the end of the furlough will need to consider options like these especially if there is insufficient work to be done. However, with the final lifting of restrictions hopefully to follow soon, there is an upside that the country is slowly getting back to normality, which is a good sign for all businesses who have suffered throughout the pandemic.

 

How can HR:4UK Help?

If you are unsure on any of the information regarding changes to the Coronavirus Job Retention Scheme, or feel as though you may need to go through a redundancy process as a measure of the end of the scheme, HR:4UK will always here waiting to help you, doing everything we can to advise and support you, ensuring you avoid any risky and costly mistakes.

Speak to us today on 01455 444222 or email info@hr4uk.com.