25th June 2020Coronavirus Job Retention Scheme and Flexible Furlough
The Coronavirus Job Retention Scheme (CJRS) will enter its second phase on 1 July. From this date, it will be possible to “flexibly” furlough employees by allowing them to return to work on reduced working hours, but still receive support for the shortfall from their previous working pattern.
With the increase in flexibility comes a gradual decrease in the generosity of the grant, which we have detailed in previous guidance.
ICAEW has recently published a detailed account of the changes to the CJRS that come in from the start of July. Having reviewed this, there are a few observations we would like to highlight:
- With the employer contributions increasing, it remains to be seen whether businesses will continue to use the government schemes, or if they will simply pay staff for the actual hours worked, without paying for the furloughed shifts.
- There is likely to be significant variation between sectors and the increased use of part-time staff, facilitated by newly varied contracts. This may mask the true working hours lost by employees.
- This issue of masking the true hours lost by workers relates primarily to the rising gig economy. Going forward, measuring incomes across the workforce will be even more important than the headline, and binary, unemployment figures.
Reminder of key aspects of the scheme
- The furlough scheme will continue to support 80% of wages up to £2,500 per month, as well as associated mandatory pension contributions and Employers’ NIC throughout June and July.
- From 1 August, employers will cease to receive reimbursement of the NIC and pension contributions, but the grant will still cover 80% of the direct salary cost as at present.
- In September the grant reduces to 70% of wages and it drops again, to 60%, in October. Whilst it has not been required for employers to contribute towards the wage costs under the present scheme, employer contributions to top up wages, at least to the 80% threshold, will be necessary from September in order to qualify for the new grants.
To discuss any of these issues further, or to find out how we can help you, please contact us.
These details are in accordance with Government guidelines on 23 June 2020.
The information contained in this guidance has been obtained from public sources and every attempt has been made to ensure its accuracy at the date of publication. In this ever-changing environment, this information is subject to change and we will not accept liability for losses arising from changes in the law or the interpretation thereof.