Furlough scheme to end 31 October 2020

Coronavirus Job Retention Scheme (CJRS):

The Chancellor has announced fundamental changes to the CJRS. In a phoenix-like move the Flexi-Furlough Scheme will now apply from 1 July 2020.

Importantly, the CJRS in its new form will be closed on 31 October 2020.

During the period from 1 June to 31 October 2020 various features of the CJRS will change. These changes will introduce flexible working arrangements and contributions to CJRS costs by employers.

We have set out a summary of the changes on a month by month basis:

June 2020

· The scheme will close to new entrants on 30 June 2020. Effectively, the final date that employers can furlough staff for the first time will be 10 June 2020.

· As before, the government will continue to fund 80% of furloughed wage costs subject to the £2,500 cap.

· As before, government will cover employer NIC and pension costs.

July 2020

From 1 July 2020, employers can bring previously furloughed workers back part-time. Employers will be responsible for covering payroll costs for time worked.

Government will cover the following costs for any hours not worked in the pay period:

· 80% of furloughed wage costs (for hours not worked) subject to the £2,500 cap.

· Employer NIC and pension costs (for hours not worked).

August 2020

From 1 August 2020, employers will be responsible for:

· Covering payroll costs for time worked, plus

· Pay for all employers' NIC and pension costs.

Government will cover the following costs for any hours not worked in the pay period:

· 80% of furloughed wage costs (for hours not worked) subject to the £2,500 cap.

September 2020

From 1 September 2020, employers will be responsible for:

· Covering payroll costs for time worked.

· Pay for all employers' NIC and pension costs, plus

· Pay for 10% of the CJRS wage costs for time not worked.

Government will cover the following costs for any hours not worked in the pay period:

· 70% of furloughed wage costs (for hours not worked) subject to a revised cap of £2,187.50.

October 2020

For this final period, from 1 October 2020, employers will be responsible for:

· Covering payroll costs for time worked.

· Pay for all employers' NIC and pension costs.

· Pay for 20% of the CJRS wage costs for time not worked.

Government will cover the following costs for any hours not worked in the pay period:

· 60% of furloughed wage costs (for hours not worked) subject to a revised cap of £1,875.

Clearly, these changes will require that the way employers calculate payroll for furloughed workers and make claims under the CJRS grants process will change month by month - until the scheme closes the end of October 2020.

Details are yet to be published but guidance on calculating claims should be available from 12 June 2020.

Time for planning – unwinding the furlough scheme

From 1 November 2020, employers will be faced with two choices:

  • Bring all furloughed employed back to normal pre-COVID working arrangements or
  • Make all or a selection of furloughed workers redundant.

In both cases, these choices will need careful consideration and in particular:

  • What level of activity will likely be re-established?
  • How will cash-flow, profitability and solvency be affected by choices made?
  • How will unwinding the furlough scheme be financed?

These are matters that will benefit from focused planning by working through various what-if scenarios. We will be in touch in the following weeks to help you address these and other planning issues as we start the process of emerging from this exceptional lock-down period.

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