June 19, 2020
When furlough started earlier this year in March it is doubtful that employers expected it to run this long. However, no one can deny that it has been a welcome relief especially for employees who feared instant dismissals. Unfortunately, since for now the coronavirus appears to be quite content to stay the scheme faced an extension to October 2020. But there have been significant changes made. Let’s have a look at what you can claim in the coming months.
There doesn’t seem to be too much of a change in June. Furlough still continues to imply that employees cannot work for the employer. Thus, June remains much the same. It is from July that the real change kicks in.
From 1st July 2020
● Now you can start bringing your previously furloughed staff to work on part time basis
● The government will continue to pay 80% of their wages for the rest of the time i.e. the balance of the normal hours they would have otherwise worked for you. This will stretch till August 2020
● Hours and shit patterns have been left to the discretion of the employer i.e. there is no minimum furlough time specified
● Of course, hours need to be agreed upon in advance (a week’s planning at least) that too in writing
● The minimum furlough claim span can be a week (or bi-weekly) and the maximum a month
● However, if things are still not looking good on the business side it is possible to still keep employees on furlough for the whole of July in which they will be paid the usual 80% of their wages
Note: For the hours that the employee does work for you, the employer will have to bear the burden of the Employer NIC and Employer pension contributions – these cannot be reclaimed or added to the furlough claim
Changes to the way Employer NIC contributions are going to be treated
● 80% of the wages will still be taken care of by the government up to the cap limit set at £2,500
● However, employer’s NIC and pension contributions would now have to be fully paid by the employers (that should work out to be 5% of employment costs on the average of the claim)
● 70% of the wages will be claimable from the government as the cap reduces to £2,187.50 (this is for the hours that the employee does not spend at work but would normally have worked)
● Here, the employer’s NIC, pension as well as 10% of the wages will make up the remaining 10% and hence, the employee is still effectively paid at 80% but the employer’s burden has slightly gone up
● 60% of wages only will not be claimable – this is capped at £1,875 and is specifically for the hours that the employee does not work
● Employers need to pay Employer NICs and pension contributions plus 20% of the employee’s wages so that the employee in effect is earning at 80% (i.e. capped at £2500)
Small employers who fall under Employment Allowance should not worry too much as their NIC liability up to £4000 would be taken care of so there won’t face too much of a problem.
Thus, for the moment, till July at least, the employee on furlough has to do no work for the employer. From July onwards part time work can begin and the amount claimable towards furlough will gradually decrease. Hopefully by then, Covid 19 will be on the way out.