Changes in Furlough Structure

Overview of changes in Furlough structure

By designating your employees as “furloughed”, you have been able to recover a portion of employee wage costs up to a £2,500 cap. As confirmed by the Government Budget delivered on 3 March 2021, the scheme will continue to operate until the end of September 2021 with some adjustment to funding levels from July 2021.

Until end of June 2021, the grant is 80% to a maximum of £2,500 per employee per month for hours unworked. Employees on full furlough (not working any hours at all), will get 80% of their wages per month unless their employer decides to top it up to 100%. Where an employee is on flexible furlough (working only some hours), they will be paid in full by their employer for the hours they work and the grant will cover 80% of pay for their unworked hours only, subject to a cap which will be less than £2500.

Details	Up to June	July	August-September
Employee gets	80%	80%	80%
Government pays	80%	70%	60%
Employer contyributes	0%	10%	20%
Maximum cap for employee	2,500.00	2,187.50	1,875.00
Employer contribution	–	312.50	625.00

Furlough from 1^st July 2021

As we move into 1 July 2021, the Government’s grant will reduce to 70% of furloughed employees’ wage costs for their unworked hours at a cap of £2,187.50. Pay for furloughed employees must remain at a minimum of 80% at a cap of £2,500 which means that employer must contribute 10% up to £312.50. Further changes continue into August.

Furlough from 1^st August 2021

From 1 August 2021 until the scheme ends on 30th September, the Government’s grant will reduce a final time to 60% of furloughed employees’ wages for their unworked hours at a cap of £1,875. With the 80% rule still intact, the employer will need to contribute 20% to staff wages up to £625. Therefore, from July through to the end of September, employer will have to cover a portion of the employee’s actual wages, as well as the national insurance and pension contributions.

Other matters to consider

The furlough scheme has been somewhat of a saving grace for a lot of employers like your client whilst lockdown restrictions have been in place. As these restrictions are slowly eased, based on coronavirus data, your client may find that they no longer need to make use of the scheme, or it may be that flexible furlough takes centre stage. Either way, your client will need to consider how they can accommodate the upcoming changes, bearing in mind that delays have been announced to England, Scotland, and Wales’ roadmaps.

If you consider making redundancies to deal with the delay to easing of coronavirus restrictions and the changing structure of the scheme, you should keep in mind that this should be a last resort. Alternatives should be considered first, e.g. layoffs or redeployment to another part of the business that is not experiencing a down turn in demand.

Conclusion

End of furlough could see flurry of older jobseekers, IFS warns.

An increased number of older jobseekers struggling to find a job in the coming months
Employees over the age of 65 were 40% more likely have been furloughed in late April than those in their 40s at around 10% and among those unemployed in their late 50s
Most older workers do not have much recent experience of searching for work

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