Businesses that furloughed employees when the Coronavirus Job Retention Scheme (CJRS) started last year were able to reclaim a portion of an employee's wages up to a cap of £2,500. This equates to 80% of the employee's regular wages.
"The scheme will continue until September 2021!"
However, there are some adjustments in the funding levels from next month. Until the end of June 2021, the grant for full furlough has been fixed at 80% per month for hours unworked. With a flexible furlough, they are paid in full for hours worked and up to 80% for the unworked hours. The £2,500 is reduced when it's flexible.
From July 2021, the Government's contribution is reduced to 70% for unworked hours with a cap of £2,187.50. This means that businesses must contribute an extra 10% out of their own pockets to keep the employee at 80% for unworked hours.
August is the final month that the Government will contribute as the CJRS ends. The contribution will only be 60% with a cap of £1,875, but businesses must keep the furloughed employee at a minimum of 80% for unworked hours. This means employers must add 20% to keep the employee's pay at the right levels.
"Don't forget, National Insurance and Pension contributions must be made by the employer too!"
The Government's thinking is that they've helped a lot of people remain employed during the pandemic, and it's time to reduce contributions as restrictions are reduced in the coming weeks and months. They are looking for employers to start phasing their workers back into full-time work by moving to a flexible furlough for the next few months.
I think this makes a lot of sense now the economy is opening back up again. However, you do need to consider how you can accommodate the reducing contributions to CJRS, whether flexible furlough will work for the next few months and if staff can be redeployed to other parts of the business that may be in better shape.
If you're thinking about making redundancies, you must remember that to stay in line with legislation, they must be an absolutely last resort decision.
Until next time ...
ROGER EDDOWES Business Godparent
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about the changes to furlough, call me on 01908 774320 and let's see how I can help you.
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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