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Furlough extension details released

Following on from Chancellor Rishi Sunak’s announcement on 12 May 2020 that the Coronavirus Job Retention Scheme would be extended until October, Mr Sunak released more details on the scheme from July to October 2020 at the Government’s daily briefing on 29 May 2020.

What changes have been announced?

  • From 1 July, businesses can bring furloughed employees back to workplaces part-time, a month earlier than previously announced.
  • Employers who have furloughed staff during the coronavirus crisis will have to start paying a share of the government scheme from August. The timetable for employer contributions is below:
  • June and July: The Government will continue to pay 80% of salaries, plus national insurance and pension contributions as it does now. Employers are not required to pay anything (see note below on employees returning to part time work from 1 July).
  • August: The Government will pay 80% of wages, up to a cap of £2,500 per month. Employers will now have to pay national insurance and pension contributions.
  • September: The Government will pay 70% of wages, up to a cap of £2,190 month. Employers will have to pay national insurance and pension contributions, and 10% of wages to make up 80% of the total, up to a cap of £2,500 per month.
  • October: The Government will pay 60% of wages, up to a cap of £1,875 per month. Employers will then need to pay national insurance and pension contributions, and 20% of wages to make up 80% of the total, up to a cap of £2,500 per month.

The scheme continues to cover those who were on an employer’s PAYE payroll on 19 March 2020. Therefore, if an employee was ineligible for the scheme at that time then the employee will continue to be ineligible for the extended period of the scheme.

It is worth noting that the scheme will close to new entrants on 10 June 2020 (e.g. furlough must have started by this date).

Employees returning to work part time

The Treasury has confirmed that the employer is responsible for paying employee wages during the time the employee works. The employer can determine hours and shift patterns when employees go back to work. Therefore, the amount of time worked can vary week to week.

Normal wages should be paid to employees whilst they work and the rest of the time will be covered by furlough pay at 80% of normal pay limited to apportionment of time not worked.

For example, if an employee works a 40-hour week, and normally earns £2,000 a month. On full time furlough, the employee will receive £1,600 a month.

From 1 July 2020 an employee goes back to work for 10 hours a week (25% of the time). Therefore, £500 a month would be earnt for the hours worked by the employee. Yet, the employee is still furloughed for 30 hours a week, so 75% of the monthly furlough pay will be covered by furlough pay; that’s £1,200. 

Total pay will for the employee for the month would be £1,700 compared to £1,600 on full furlough.

Rushi Sunak also said in his briefing on Friday that after eight months of the furlough that this would be unlikely to be extended.  HM Revenue & Customs will announce more details of how the furlough scheme interacts with work on Friday 12 June.