Furlough scheme extension rules revealed – HMRC publishes policy paper on covid wage plans

Furlough scheme extension rules revealed – HMRC publishes policy paper on covid wage plans

Furlough payments have been crucial for millions of families spread across the UK and as such, they would likely have been very relieved to hear that the scheme will be extended. Rishi Sunak detailed in late May that the Job Retention scheme will continue into the coming months.

He warned however that “the furlough scheme cannot continue indefinitely” and to make it more affordable, he asked employers to contribute to the cost.

As he said on May 29: “I believe it is right, in the final phase of this eight-month scheme…to ask employers to contribute, alongside the taxpayer, towards the wages of their staff.

“But I understand, too, that businesses and employers have been through an incredibly difficult time.

“So I have decided to ask employers to pay only a modest contribution, introduced slowly over the coming months.

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The Policy Paper published on June 12 detailed the following: “From 1 July, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked.

“From 1 August 2020, the level of grant will be reduced each month.

“To be eligible for the grant employers must pay furloughed employees 80 percent of their wages, up to a cap of £2,500 per month for the time they are being furloughed.”

The paper goes into the specifics of how these calculations will work in practice but they also provide an easy to follow table.

The table itself revealed that government support for employer National Insurance and pension contributions will continue in July but stop from August.

Wages will also be supported by up to 80 percent through July and August, up to a maximum of £2,500.

This will then drop to 70 percent in September up to £2,187.50.

It will then drop one more time in October to 60 percent, with a maximum monetary value of £1,875.

From August onwards, employers will need to contribute to the wages of staff placed on furlough.

The table revealed that in September, employers will be asked to contribute 10 percent to furloughed wages up to a maximum of £312.50.

This will increase to 20 percent in October, up to £625.

Regardless of the changes to who covers the furlough costs, the underlying staff will still have 80 percent of their income protected.

Since these changes were announced, many experts and organisations have warned that asking employers to contribute to the costs could lead to a wave of redundancies and general unemployment.

It remains to be seen if these warnings will come to fruition.

Published at Sat, 13 Jun 2020 16:18:00 +0000