Furlough scheme begins winding down as scheduled

Jun 23, 2021

The furlough scheme is on track to wind down on 30 September 2021 as planned, despite a four-week delay in the easing of COVID-19 restrictions previously set for 21 June 2021.

The temporary furlough scheme, more formally known as the coronavirus job retention scheme (CJRS), will begin to taper off from 1 July 2021, before being scheduled to end on 30 September 2021.

Chancellor Rishi Sunak has so far rejected pleas to maintain emergency economic support in line with public health restrictions.

It means that not only will some businesses have to contend with an extra four weeks of restricted trading, but they will have to begin payment contributions to the CJRS from 1 July without as much business as they could have had without restrictions.

Kate Nicholls, chief executive at UKHospitality, described it as "unsustainable" for businesses struggling to break even, while "every day of restrictions makes their losses mount" at the same time as their furlough costs will start to increase.

Sources close to the Chancellor allege that Sunak believes sufficient funds are already in place to cope with the delay. Others said setting the furlough expiry date as 30 September was his way of planning for unlocking delays.

‘Unprecedented measures for unprecedented times'

On 20 March 2020, Rishi Sunak announced "a combination of measures unprecedented for a government of this nation", including the furlough scheme.

It allowed any employer, small or large, to contact HMRC for a grant to cover most wages of people not working but furloughed and kept on the payroll. Otherwise, they might have had to be laid off permanently.

The grants covered 80% of workers' monthly pay up to a total of £2,500, "above the median income" as Sunak announced more than a year ago.

Allowing wages to be backdated from 1 March, Sunak initially opened the scheme for three months, promising to extend it for longer "if necessary".

October 2020 was later announced as an end date, only for it to be pushed back until 30 April 2021, and then, following the Spring Budget, 30 September 2021.

Up to 31 March 2021, around £60 billion had been spent on the furlough scheme out of a total of £372bn spent by the Government's emergency economic response to the pandemic.

Up to 14 May 2021, the furlough scheme had supported a total of 11.5m jobs at various times, across various industries.

A lot of businesses still rely on it too, with 35% of employers still claiming furlough grants to support 3.4m jobs as of 30 April 2021, according to HMRC.

Tapered end

In Spring Budget 2021, Rishi Sunak not only announced the furlough scheme was due to end on 30 September 2021, but that it would begin to be tapered off from 1 July through gradual reductions in furlough grants.

From this date, Government contributions will decrease to 70% of an employee's pay up to £2,187.50 per month, while employers will be obligated to contribute 10%, up to £312.50.

In August and September 2021, the Government will contribute 60% up to £1,875 while employers must pay 20% up to £625.

Employers can still choose to top-up their employees' wages out of their own pocket, but furloughed employees will continue to get at least 80% of their monthly wages as the scheme winds down.

Talk to us about the furlough scheme.

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