October furlough changes: What do business owners need to know?
Advice by Alan Price, employment law expert and CEO of BrightHR
The Job Retention Scheme is coming to an end on 31 October, and in its final month, there are some significant changes to its funding that employers and employees need to be aware of.
When it was first implemented, the scheme was funded entirely by the government. However, since 1 August, the government has contributed less to the scheme, meaning employers have had to put more of their funds into furloughed staff wages to ensure they continue to earn at least 80% of their salary for the time in which they do not work.
From 1 October, the government will only provide 60% of this payment; employers will need to top up the remaining 20% themselves. They will also need to continue paying employee national insurance and employer pension contributions.
As has been the case since July, furloughed staff can still be asked to return to work on a part-time basis. However, employers need to pay them in full for the hours that they work. They can also be removed from the scheme if the employer deems it necessary, which includes making them redundant.
Once the scheme ends on 31 October, it will be replaced by a new government-funded system of support, the Job Support Scheme, on 1 November. This scheme will be slightly different to the furlough scheme and is designed to support jobs that are not entirely dependent on government funds.
Under the Job Support Scheme, employees will work at least one-third of their normal working hours. The government and the employer will then each provide pay for one-third of the number of hours in which they do not work, meaning all employees on the scheme will receive at least 77% of their normal wages. The government’s contribution will be capped at £697.92 per month.
For example, an employee who normally works five days a week and earns £350 per week. Under the Job Support Scheme, they will work 40% of normal working hours (two days a week). The percentage of hours lost is 60% (worth £210). The employer pays £140 for hours worked, and a further £70 (one-third of hours lost). The government will pay £70 (one-third of hours lost). The employee receives £280 in total per week.
All companies will be eligible to make use of this; however, larger businesses will need to pass specific financial tests. Companies will also not need to have furloughed staff previously.
Employers will be able to claim a reimbursement for employee wages from December 2020 via an online portal.