The furlough scheme is changing. Don’t get caught out.
Page Kirk's Director of Tax Neil Moon looks at the forthcoming changes to the Coronavirus Job Retention Scheme and advises businesses to be prepared.
If you currently have employees on full or partial furlough and are paying them under the Job Retention Scheme, it is crucial that you are making the appropriate contribution from 1st September.
HMRC have confirmed that the amount the government contributes towards the scheme is going to be reduced from 80% of an employee's wages to 70% across all types of business. Employees who are being paid by the scheme in any way must still be paid 80% of their wages for the period they're unable to work, up to a cap of £2,500. Meaning employers will need to pay the remaining 10% to top up the furlough pay.
The government will now only pay up to £2,187.50 for employees on full furlough. It is also important to note that this is pro-rata, so this figure only applies to full-time furloughs and must be adjusted according to hours.
Imagine, for example, if you have an employee who is furloughed 50% of the time and working the other 50%. The maximum you can claim for is 70% of the 50% furlough time (ie £1,093.75).
If you decide to bring employees back to work and off furlough, you will need to continue paying them fully, as well as their National Insurance contributions and Auto-Enrolment pension contributions.
Inevitably this means you will need to make changes to your payroll and have a budget that will take care of the planned future reductions to 60%.
What happens in October?
HMRC furlough contributions will be reduced from 70% to 60%
The government will pay up to £1,875 per month (60%) in furlough contributions from October 2020. Following the same principle as in September, employers will need to pay the remaining 20% to top up the furlough pay to £2,500, as well as NI and pension contributions. On 31 October, the scheme will end, and you will need to decide to bring back furlough employees to work their normal hours, reduce their hours or terminate their employment. If you do decide to bring back a furlough worker, you will qualify for the £1,000 bonus if they are still under your employment at the end of January 2021 and they earn at least £520 per month in this period which is part of the government's Plan for Jobs.
It is important that furlough contributions from HMRC are calculated correctly in order to avoid having to pay any money back. We recognise that many businesses will have difficulties keeping on top of their furlough claims, as they bring some employees back and contribute more for those still on furlough.
As times are still uncertain, it is completely possible that some of this information will change over the coming months. At Page Kirk, we will work hard to provide you with the latest updates on the coronavirus schemes. If you need more information, would like help with your Job Retention Scheme applications or are looking for any business advice – including forecasting and budgets – please contact a member of our team calling on 0115 955 5500 or email at enquiries@pagekirk.co.uk.