Furlough Scheme – Changes to contributions from July 2021
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Furlough Scheme – Changes to contributions from July 2021
On Wednesday 3 March 2021, the Chancellor, Rishi Sunak announced further changes to the furlough scheme. These changes extend the furlough scheme until 30 September 2021 and slowly reduce the contributions payable from July 2021.
What are the changes to the furlough scheme?
The changes to the furlough scheme announced on 3 March 2021 are to extend the scheme to 30 September 2021, allow new employees engaged before 3 March 2021 to join the scheme and to reduce the contributions payable by the Government from July 2021.
New entrants to the Scheme
Employers do not need to have previously claimed for an employee to be eligible to furlough them under the extended scheme.
For periods ending on or before 30 April 2021, employers can claim for employees who were employed on 30 October 2020, as long as they have made a PAYE Real Time Information submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
For periods starting on or after 1 May 2021 employers can claim for employees who were employed on 2 March 2021, as long as they have already made a PAYE Real Time Information submission between 20 March 2020 and 2 March 2021.
Changes in contributions
From July 2021, the government will start paying less towards those employees on furlough. They will reduce contributions from 80% up to a cap of £2500 to lower percentages. However importantly employees throughout this time must still receive 80% of their wages up to £2500, for furlough to be valid. In summary:
- From 1 July 2021: 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 August 2021: 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 scheme will close on 30 September 2021 and employers will need to bear all employee costs again. Employers will therefore need to reconcile these extra amounts into the budget for their business and also evaluate the likely need for these employees after 30 September 2021.
If you have any queries, please contact a member of the Employment team.
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