As part of the Spring Budget 2021, the Chancellor today (3 March 2021) confirmed another extension to the Government’s Coronavirus Job Retention Scheme (‘Furlough’) to 30 September 2021.
This will be the fourth time the scheme has been extended after it was first introduced in response to the Covid-19 outbreak resulting in the UK’s first lockdown in March 2020 and was originally expected to end after six months in October 2020.
The key principle behind the scheme is to prevent mass unemployment, with the Government initially agreeing to fund up to 80% of wages, for those staff working in businesses that were forced to close or where there was insufficient work available to those that remained open during the pandemic.
The hope is that, once the spread of the virus is under control and lockdowns are no longer needed, businesses and staff will be able to return to working in the way they did before the pandemic, thereby reducing the need for businesses to take the more permanent action of letting staff go or implementing redundancies.
There is no doubt that the furlough scheme has been a crucial lifeline for businesses and individuals alike, however, since it was introduced in March 2020, there have been many different versions of the scheme and the continued uncertainty of when this so-called temporary measure will end, has in some cases, caused operational problems for businesses that want to be able to plan ahead.
Furlough timeline
• 1 March 2020 to 30 June 2020 – Government funded 80% of wages (up to a cap of £2500 per month) plus employer national insurance and pension contributions for those that had been on the employer’s payroll as of 19 March 2020. No employer contributions required. Minimum period of three weeks furlough at a time.
• 1 July 2020 – Flexible Furlough introduced (i.e. staff able to work some of their contractual hours and be furloughed for remaining hours). Government funded 80% of wages (up to a cap of £2500 per month) during periods of furlough and employer responsible for paying normal contractual salary for hours worked. No minimum furlough period.
• 1 August 2020 – Furlough scheme continued at 80% Government contribution but with employers responsible for paying employer National Insurance and pension contributions.
• 1 September 2020 - Government funded 70% of wages, with employers responsible for contributing 10%, plus employer National Insurance and pension contributions.
• 1 October 2020 – Government funded 60% of wages, with employers responsible for contributing 20%, plus employer National Insurance and pension contributions.
• 31 October 2020 – Original intended end date of furlough scheme. Extended to 31 March 2021.
• 1 November 2020 - Government reverted to funding 80% of wages (up to a cap of £2500 per month). Employers responsible for paying employer National Insurance and pension contributions only.
• 17 December 2020 – Government announced extension to scheme to 30 April 2021.
• 3 March 2021 - Government announced extension to scheme to 30 September 2021.
• April to June 2021 - Government will continue to fund 80% of wages (up to a cap of £2500 per month). Employers responsible for paying employer National Insurance and pension contributions only.
• July 2021 - Government will fund 70% of wages, with employers responsible for contributing 10%, plus employer National Insurance and pension contributions.
• August to September 2021 - Government will fund 60% of wages, with employers responsible for contributing 20%, plus employer National Insurance and pension contributions.
• 30 September 2021 – Intended end date of furlough.
Whilst today’s announcement is likely to be a relief to many, this continued state of limbo, which is now set to continue for another six months (three months after the lifting of most Government restrictions are anticipated in June 2021) does not come without its challenges (or cost) for employers.
The long term impact of having staff on extended furlough leave is likely to be quite different to the effect that was intended when the scheme was introduced on a short term basis, giving everyone some necessary breathing space when they were reeling from the initial impact of the crisis.
It remains to be seen whether the ‘cliff edge’ of job losses that the Government is keen to avoid, will still occur once employers are required to contribute to furloughed workers’ pay of 10% in July and 20% thereafter for the remaining two months of the scheme. The last time this was introduced in the Autumn of 2020, it was certainly a trigger point for businesses to consider the future viability of jobs in their organisations.
In the meantime, remember - staff who are furloughed continue to accrue annual leave as normal. Therefore, on the basis we now know the furlough system is here to stay for the next six months (and could well be extended further), we would encourage businesses to plan for staff regularly taking their annual leave throughout the year whilst they are on furlough to prevent an excessive build-up of leave once furlough (finally) comes to an end.
If you would like to discuss any of the above issues or any other employment matter, please do not hesitate to contact Joseph Oates on email: jmo@cooperburnett.com or Natasha Smith on email: nes@cooperburnett.com or tel: 01892 515022.
This blog is not intended as legal advice that can be relied upon and CooperBurnett does not accept any responsibility for the accuracy of its contents.
