Changes to The Furlough Scheme from 01 July 2021

The furlough scheme has saved jobs, however as the economy starts to recover and restrictions are lifted furlough will come to an end. This means many employers may have to make critical business decisions before 30 September 2021.

From 1st July employers will need to start contributing to the costs of keeping their staff on furlough.

What’s changing?

• From 1 July, the government will pay 70% of furloughed workers’ salaries, and employers will pay 10%
• In August and September 2021, the government’s contribution will fall to 60% and employers will pay 20%

The monthly limit of £2,500 will stay in place, so workers will not be any worse off, however, it will be more expensive for employers to keep staff on furlough leave.

By making furlough more expensive for employers, the government hopes to encourage them to take workers back full-time if they can, and only furlough those they have to. However, some employers may make the decision to make staff redundant sooner.

Employers already have to pay their employees’ pension and National Insurance contributions.

Will furlough be extended?

Furlough has already been extended four times, therefore it is unlikely to be extended again, especially given that the restrictions will be fully lifted on 19 July.

Flexible furlough

Businesses will still have the option to bring staff back to work on a part-time basis, known as “flexible furlough.”

This option will allow employers to only pay for the hours the staff is needed, while continuing to receive the furlough payment for hours not worked by the staff. This is calculated by reference to their usual hours worked in any claim period.

If you decide to put staff on flexible furlough, discuss it with them and agree on the days/hours. Employers must ensure that any agreement is confirmed in writing.

What do you need to do as a business before 01 July?

• Look at the structure of your business; which roles are required?
• Consider which staff can remain on furlough
• Consider whether the business can afford to keep staff on furlough from 01 July, if not it may be time to consider making redundancies.
• Consider other options such as a reduction in hours or alternative employment.
• Consider whether zero hours workers need to be kept on furlough, if not, write to them to take them off furlough leave.

To talk to an Employment Solicitor about redundancies, furlough agreement and managing furlough please email contact@davenportsolicitors.com or call us on 0207 903 6889.

The material contained on this website contains general information only and does not constitute legal or other professional advice and should not be relied upon as such. While every care has been taken in the preparation of the information on this site, readers are advised to seek specific legal advice in relation to any decision or course of action.