Major change to furlough scheme comes into force TOMORROW – and what it will mean

Another huge change to the furlough scheme will come into force tomorrow as the government prepares to wind it down.

By Dan Windham
Monday, 31st August 2020, 12:22 pm

From July 1, employers could bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours not worked.

From 1 August, the level of grant would be reduced each month.To be eligible for the grant employers must pay furloughed employees 80 per cent of their wages, up to a cap of £2,500 per month for the time they are being furloughed.

Employers would also have to pay employer National Insurance Contributions and pension contributions for the hours the employee is on furlough.

Britain's Chancellor of the Exchequer Rishi Sunak (Photo by TOLGA AKMEN/AFP via Getty Images)

From tomorrow, the government will pay 70 per cent of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.

The number of furloughed workers fell by a quarter between May and June, but the Government’s scheme is still supporting millions of employees, according to a new study.

The Resolution Foundation said the number of furloughed workers peaked at 8.9 million in early May, falling to 6.8 million by the end of June.

The number of fully furloughed workers continued to fall sharply in July and August, as the economy continued to reopen and partial furloughing was introduced, said the think tank.

The Job Retention Scheme (JRS) is being wound down, and will end in October, raising fears of an increase in job losses.

The Resolution Foundation said its study highlighted how sectors such as hospitality had been hardest hit, with 96% of pubs and similar companies making use of the JRS, compared with just 9% of non-specialised retail stores such as supermarkets.

The Foundation said rather than ending the JRS altogether, or maintaining it in its current form after October, the Chancellor should focus the scheme on hardest-hit sectors and make sure it subsidises the wages of those returning to work, rather than staying off.

Nye Cominetti, senior economist at the Resolution Foundation, said: “The Job Retention Scheme has played a critical role in protecting firms and workers from the worst of the economic crisis, with almost nine million workers furloughed at its peak in early May.

“The good news is that the number of fully furloughed workers has fallen substantially since early May as the economy has gradually reopened.

“However the fact that 6.8 million workers were still furloughed at the end of June, with hard-hit sectors such as hospitality still operating well below capacity, highlights the scale of redundancy risks workers face as the scheme is wound down by the end of October.

“The immediate priority for the Chancellor should be to bring forward further targeted support to these sectors.

“Otherwise, the significant policy success of the retention scheme will be followed by a big post-furloughing unemployment spike this autumn.”