Furlough scheme extension rules revealed – HMRC publishes policy paper on covid wage plans

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FURLOUGH rules were recently extended by the government. Rishi Sunak detailed that both the Coronavirus Job Retention Scheme Self-Employment grant scheme would continue into the coming weeks and details of this have recently been revealed.

Furlough payments have been crucial for millions of families spread across the UK and as such, they would likely have been very relieved to hear that the scheme will be extended. Rishi Sunak detailed in late May that the Job Retention scheme will continue into the coming months.

He warned however that “the furlough scheme cannot continue indefinitely” and to make it more affordable, he asked employers to contribute to the cost.

As he said on May 29: “I believe it is right, in the final phase of this eight-month scheme…to ask employers to contribute, alongside the taxpayer, towards the wages of their staff.

“But I understand, too, that businesses and employers have been through an incredibly difficult time.

“So I have decided to ask employers to pay only a modest contribution, introduced slowly over the coming months.

“In June and July, the scheme will continue as before, with no employer contribution at all.

“In August, the taxpayer contribution to people’s wages will stay at 80 percent.

“Employers will only be asked to pay National Insurance and employer pension contributions… which, for the average claim, account for just 5 percent of total employment costs.

“By September, employers will have had the opportunity to make any necessary changes to their workplaces and business practices.”

The Chancellor’s announcement provided clear insight into what the country can expect from this scheme in the future and yesterday, the government released details on exactly how the changes will work.

The Policy Paper published on June 12 detailed the following: “From 1 July, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked.

“From 1 August 2020, the level of grant will be reduced each month.

“To be eligible for the grant employers must pay furloughed employees 80 percent of their wages, up to a cap of £2,500 per month for the time they are being furloughed.”

The paper goes into the specifics of how these calculations will work in practice but they also provide an easy to follow table.

The table itself revealed that government support for employer National Insurance and pension contributions will continue in July but stop from August.

Wages will also be supported by up to 80 percent through July and August, up to a maximum of £2,500.

This will then drop to 70 percent in September up to £2,187.50.

It will then drop one more time in October to 60 percent, with a maximum monetary value of £1,875.

From August onwards, employers will need to contribute to the wages of staff placed on furlough.

The table revealed that in September, employers will be asked to contribute 10 percent to furloughed wages up to a maximum of £312.50.

This will increase to 20 percent in October, up to £625.

Regardless of the changes to who covers the furlough costs, the underlying staff will still have 80 percent of their income protected.

Since these changes were announced, many experts and organisations have warned that asking employers to contribute to the costs could lead to a wave of redundancies and general unemployment.

It remains to be seen if these warnings will come to fruition.

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