The final furlough – what to expect next?

Following the government’s announcement that it is phasing out the Coronavirus Job Retention Scheme – or furlough – many businesses and furloughed staff have been left confused about what this means for them.

To help navigate the furlough landscape, Richard Jeffrey, Director of Business Growth at GC Business Growth Hub sets out the milestones ahead over the coming months to help inform business planning and address any furlough questions.

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme, introduced in March, has already supported more than one million businesses across the country, by providing 80% of the salary of employees placed on ‘furlough’ who may otherwise have faced redundancy.

The scheme has allowed businesses to furlough their staff and provide no requirement for employers to top up the salaries. While under the provision furloughed staff are not able to carry out work in any capacity.

According to the latest business survey published by the Growth Company on the 15 June, more than 56% of businesses in Greater Manchester have used the scheme and furloughed staff. Of these, approximately one in two have furloughed more than half of their staff.

The data also shows that the highest proportion of firms by sector to have furloughed staff are Construction, Green (Waste & Energy), Hospitality, Leisure and Tourism, and Manufacturing and Engineering.

The scheme which has enabled many businesses to continue operating was extended on 12 May, with the Chancellor revealing the details of its second and final phase on 29 May.

Furlough timeline

June

  • Government will continue to cover 80% of employee salaries including employer National Insurance and pension contributions of furloughed staff.
  • 10 June marked the final date by which an employer could furlough a staff member for the first time. This does not apply to parents returning from paternity and maternity leave who were still be eligible after the cut-off date, provided they work for an employer who has previously furloughed employees.
  • From 30 June onwards, businesses will only be able to furlough employees who have already been furloughed for a full three-week period prior to this date.
  • During the month of June, furloughed employees can not undertake any work for their employer.
  • If they choose, employers can still top up employee wages above the 80% total and £2,500 cap at their own expense.

July

  • From 1 July the scheme becomes more flexible and employers will be given the opportunity to bring back furloughed employees for “any amount of time and any shift pattern”. Any new working arrangements will have to be discussed and agreed with the employees in writing.
  • Government will continue to cover 80% of employee salaries as well as the employer National Insurance and pension contribution for the hours not worked.
  • Businesses will be required to pay staff for any hours worked based on their employment contract as well was pay for the tax and National Insurance costs due on those amounts.
  • When claiming the grant for employee hours not worked, businesses will need to:
  • Calculate the amount to claim by reference to furloughed employees’ usual hours worked in a claim period.
  • Report the hours the furloughed employee worked including the usual hours they would be expected to work in normal circumstances in a claim period.
  • Report and claim for a minimum period of a week.
  • From 1 July, claim periods will no longer be able to overlap months.
  • 31 July will be the last day businesses can submit claims for periods ending on or before 30 June.

What could this mean for your business?

The introduction of flexible arrangements will provide businesses the opportunity to plan for the end of the scheme in October and understand where the pinch points are.

 

August

  • From August, the government will continue to cover 80% of employee salaries up to £2,500 per month.
  • Employers will be required to cover the full National Insurance Contributions and pension contributions.

September

  • From September, the government will cover 70% of employee salaries up to a cap of £2,187.50 per month for the hours the employee does not work.
  • Employers will need to cover 10% of salaries of furloughed employees to make up 80% total up to a cap of £2,500.
  • Employers will be required to pay the full National Insurance Contributions and pension contributions.

What could this mean for your business?

With employers required to start paying a contribution towards employee wages from September, some businesses may need an injection of cash to support their operations to ensure resilience.

Government schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS), the Bounce Back Loan Schemes (BBLS) and the Local Discretionary grants could provide necessary funds required to improve cashflow during this period. Details on the different finance schemes can be found through the Growth Company’s Coronavirus- Finance page.

October – last month of the scheme

  • During October, the government will cover 60% of employee salaries up to a cap of £1,875 for the hours the employee does not work.
  • Employers will be required to pay 20% of salaries to make up the 80% total up to a cap of £2,500.
  • Employers will continue to be required to pay National Insurance Contributions and pension contributions.

What could this mean for your business?

With the job retention scheme ending in October and the financial pressures that some businesses might be under, there may come a time, to consider redundancy as a last resort to ensure the sustainability of the business. For some businesses, their ongoing issues, could potentially also lead to an insolvency scenario.

People looking for advice can contact the Hub where our advisors are here to support businesses and individuals, while information and advice is available via the GC Business Growth Hub coronavirus support hub, part of the #HereForBusiness initiative.


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