Chancellor unveils changes to furlough scheme

The Chancellor, Rishi Sunak, has announced a series of changes to the Coronavirus Job Retention Scheme (CJRS) from  1st July 2020 that will see furloughed employees able to return to work part-time, but with the value of Government support reducing gradually.

The scheme will close to new entrants from 1 July 2020, however as there is a three week minimum furlough requirement, then it means that any new period of furlough must have started by the 10 June to ensure that employees will then qualify by 1 July 2020. The changes have effectively put a limit to the number of staff that can be included on a claim and this scheme will close at the end of October 2020.

A system of ‘flexible furloughing’ will come into effect from 1 July 2020 , allowing employers to bring back furloughed employees to work on a part time basis. The employer would be required to pay for the cost of the time staff are working and the grant would be for the time furloughed..

Employers will need to reach new flexible furlough agreements with any furloughed employees brought back on a part-time basis.

From 1 August, CJRS grants will cease to cover Employer NICs and pension contributions, with this cost passing to employers. The grant will continue to cover 80 per cent of furloughed employee’s usual wages, up to a cap of £2,500 a month.

However, from 1 September, the value of the grant will fall to 70 per cent of a furloughed employee’s usual wages, capped at £2,187.50 a month. Employers will be expected to contribute the remaining 10 per cent plus NICs and pension contributions to reach a combined total payment to the employee of 80 per cent of their usual wages, up to a cap of £2,500 a month.

October will see the value of the Government contribution fall again to 60 per cent, capped at £1,875 a month, with employers expected to contribute 20 per cent of a furloughed employee’s usual wages plus NICs and pension contributions to reach the total of 80 per cent, capped at £2,500 a month.

Full details of how the scheme will operate from this point are expected to be announced on 12 June 2020.

The announcement comes days after the Chancellor issued a new directive to HMRC, updating the record-keeping requirements of the scheme.

Under these requirements, the written agreement that the furloughed employee will, under the current terms of the scheme, cease all work must be retained until 30 June 2025 and:

  • State the main terms and conditions;
  • Be incorporated either expressly or implicitly in the contract of employment; and
  • Be either made or confirmed in writing.

It is widely expected that HMRC will audit use of the scheme retrospectively over the coming months and years, with potentially hefty penalties for those found to have acted improperly.