THE furlough scheme will soon come to an end as lockdown restrictions ease across the UK and more Brits returning to work.
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Chancellor Rishi Sunak said after months of support, the government now needs to start weaning “addicted” workers off the state-subsidised wage support.
Employment experts have warned that withdrawing the support could put thousands of jobs at risk.
If you’re worried about your job, Times Money Mentor has a guide to your rights if you’re made redundant while on furlough.
But when will it come to an end? Here’s everything you need to know about the future of the furlough scheme and how it affects you:
When will the furlough scheme end?
The furlough scheme has been pushed back to end on October 31.
The government then announced on April 17 that it would be extended by a month until the end of June, 2020.
Taxpayer subsidiaries will drop and employer contributions will increase gradually until then.
What is the government furlough scheme?
Simply put, if your employer has been forced to close temporarily due to coronavirus, it can claim 80 per cent of your wages, which it will then pay to employees.
Claims are, however, capped at £2,500 a month for each employee, so if you usually earn a lot more than that you’ll see a bigger drop in wages.
Your company can top up the remaining money you’d usually be paid, but most businesses are taking a serious hit and have chosen not to.
Bosses can also claim employer national insurance contributions and minimum automatic enrolment pension contributions on top for wages up to £2,500 a month, although this is due to end in August.
How many people have been furloughed?
More than 9million workers have been furloughed, although new applicants were prevented from joining the scheme from June 10.
Two-thirds of British businesses have used the government’s scheme since it was announced and one in three companies have put at least 75 per cent of their workforce on furlough, according to a survey published by the British Chamber of Commerce
But there are concerns many struggling companies will lay off staff without the security of government-backed cash.
Under current employment laws, companies have to give 45 days notice before cutting roles.
On July 8, Chancellor Rishi Sunak said in a statement to MPs: “Furlough has been a lifeline for millions supporting people and businesses to protect jobs. But it cannot and should not go on forever.
“It gives people false hope that they would be able to return to the jobs they had before.”
How much has the scheme cost the government?
The Office for National Statistics (ONS) estimates furlough is costing around £8billion a month.
Data released by the Treasury show that by midnight on June 28, £25.5 billion in wage subsidies had been paid to employers.
Additionally the support scheme for the self-employed rose to 7.7bn.
How is the furlough scheme changing?
Changes from August
Businesses will start picking up the furlough bill in August when they have to pay national insurance (NI) and pension contributions.
This represents about 5 per cent of employment costs for businesses.
The government will continue to pay 80 per cent of staff wages up to the £2,500 a month cap.
Changes from September
From September, the government’s contribution will fall to 70 per cent of wages up to a cap of £2,187.50 a month.
This means employers will have to pay 10 per cent of salaries to make up 80 per cent of wages in total up to a cap of £2,500.
How does the furlough scheme work?
ANY UK organisation with employees can apply to furlough their workers, including businesses, charities, recruitment agencies and public authorities.
It’s up to your place of work to apply to the scheme, meaning you won’t need to contact the government yourself.
To access the scheme, your employer must comply with the following:
- Designate employees who cannot do their jobs due to the coronavirus measures put in place by the government
- Notify those employees of their new “furloughed” status
- Submit information to HMRC about furloughed employees to set up a system for reimbursement and about existing systems that will facilitate payments
To be furloughed, you must have been on a payroll on March 19.
Workers can ask previous employers to rehire and furlough them, even if they left for another job, but firms don’t have to do this.
The furlough scheme did, however, close to new applicants on June 10.
Employers will also need to continue to pay NI and pension contributions.
For the average claim, this represents 14 per cent of the employment costs.
Changes from October
In October, the government’s contribution will fall again to 60 per cent of wages up to a cap of £1,875 a month.
This will see businesses have to pay 20 per cent of salaries to make up 80 per cent in total up to a cap of £2,500.
In addition, employers will need to continue to make NI and pension contributions.
It means employers footing the bill for 23 per cent of employment costs.
A new £1,000-bonus for employers who take back furloughed workers and employ them continuously through to January 31, 2021 is also set to be launched.
Earlier in April, the qualifying date workers had to be employed on to be eligible for the scheme was extended from February 28 to March 19 – benefitting up to 200,000 extra workers.
But thousands of workers are missing out on furlough pay due to a loophole.
We’ve put together a guide to how furlough affects you, including pay, annual leave rights and how it works if you’re on maternity or sick leave.
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