Changes in furlough contributions
From 1 August 2020, the government will start paying less towards those employees on furlough. They will gradually reduce contributions from 80% up to a cap of £2500 to lower percentages until the CJRS ends on 31 October. Employers should note that despite the reduction in government contributions throughout this time employees n furlough must still receive 80% of their wages up to £2500, for the employer to be eligible to claim payments under the CJRS.
The changes in contributions can be summarised as follows:
- From 1 August 2020: The government will pay 80% of wages up to a cap of £2,500 (i.e. there is no change to the scheme in that sense), but will require employers to pay employer’s national insurance contributions and pension contributions.
- From 1 September 2020: The government will pay 70% of wages up to a cap of £2,187.50. The employer will continue to pay employer’s national insurance contributions and pension contributions. However the employer will also have to pay 10% of wages to make up the 80% total up to a cap of £2,500.
- From 1 October 2020: The government will pay 60% of wages up to a cap of £1,875. The employer will continue to pay employer’s national insurance contributions and pension contributions. However the employer will also have to pay an additional 20% to top up the 80% total up to a cap of £2,500.
The CJRS will close on 31 October 2020 and employers will need to bear all employee costs again. Employers will therefore need to budget for their business and to assess the likely need for these employees after 31 October 2020. If employees will not be required after 31 October it may be necessary to make redundancies. Employers need to consider consultation periods (where relevant) and also the necessary notice period.