Government announces furlough scheme changes – what you need to know
The Chancellor Rishi Sunak has announced a series of changes to the Government's furlough scheme today, including workers being able to go back part-time from July. Here's what you need to know.
From Wednesday 1 July, businesses using the Government's furlough scheme will be able to bring furloughed employees back part-time. Even if they don't, the Government will continue to pay 80% of staff salaries during June and July.
Additionally, from August to October, while employees on furlough will continue to get 80% of their salary, who pays for that will change slightly. The amount the state pays will be reduced each month, with employers expected to contribute towards furloughed employees' employment costs. The scheme will come to an end on 31 October 2020, as previously announced.
Not sure what the furlough scheme is? See our Coronavirus Employees' Help guide for full information, including who's eligible for the scheme.
Watch: Martin's view
Before you get into the full detail below, here's MSE founder Martin Lewis's analysis of the announcement:
What is the furlough scheme and what's changing?
In response to the coronavirus pandemic, the Government brought in the furlough scheme – officially called the Coronavirus Job Retention Scheme – to help employers pay their workers during lockdown. The idea was to encourage employers to keep jobs on standby, ready for a quick restart when lockdown ends, and also to discourage employers from making mass redundancies.
The scheme was originally planned to cover salaries in March, April and May, but was previously extended to also cover June. Earlier this month, it was announced that it'll run until at least the end of October, though with little detail on how that would work. Today's announcement fills in some – but not all – of that detail.
Currently, the state pays your employer 80% of your salary, up to £2,500/month, and you can't work for your employer while you're on furlough. Nothing changes here until 30 June 2020.
But from 1 July 2020, there are changes. You'll be able to go back and do some work for your employer part-time. This had previously been announced, though it's been moved forward from the originally-stated date of 1 August 2020.
Who pays me if I go back to work part-time?
The Treasury says your employer is responsible for paying your wages for the time you're working. It will also decide the hours and shift patterns you'll work when you go back.
MSE founder Martin Lewis has been told by the Treasury that there's no limit on the number of hours you can work. If you work a 40-hour week, for example, and your employer wants to, it can get you to work 39 hours and then furlough you for the remaining hour. The amount of time you work each week can also vary over the month, with employers varying it week by week.
When you are working, you should be paid your normal wage for those hours. For the hours you're not working, you'll be covered by furlough pay, so you'll get at least 80% of your normal wage. Let's run through an example of how work and furlough pay could interact:
Let's assume you work a 40-hour week, and you earn £1,000 a month for that. On furlough, you don't work and you get £800 a month.
Yet if you went back to work for 10 hours a week, that's a quarter of your normal working time, so you'd earn £250 a month for the work you do. Yet you're still furloughed for 30 hours a week, so you get three quarters of your monthly furlough pay – that's £600.
Adding it up, you'd get a total of £850 a month working those 10 hours, compared with £800 on full furlough.
The Treasury told us that HM Revenue & Customs will announce more details of how the furlough scheme interacts with work on Friday 12 June.
What's changing with who pays for my salary while I'm on furlough?
If you stay on furlough until October, you won't see any changes in terms of how much you're paid or when, you'll still get a minimum of 80% of your normal wage. What's changing is more a behind-the-scenes adjustment of what the state covers and what your employer has to cover. Here's a road map of how that'll work:
- June and July: The state will continue to pay 80% of salaries, plus national insurance and pension contributions as it does now. Employers are not required to pay anything.
- August: The state will pay 80% of wages, up to a cap of £2,500/mth. Employers will now have to pay national insurance and pension contributions.
- September: The state will pay 70% of wages, up to a cap of £2,190/mth. Employers will have to pay national insurance and pension contributions, and 10% of wages to make up 80% of the total, up to a cap of £2,500/mth.
- October: The state will pay 60% of wages, up to a cap of £1,875/mth. Employers will then need to pay national insurance and pension contributions, and 20% of wages to make up 80% of the total, up to a cap of £2,500/mth.
While this doesn't affect you as an employee on the face of it, there could be a serious consequence of this timetable. If your employer doesn't believe your role will be viable if it needs to start paying for it, there's a chance that this escalation of employment costs for the employer could tip it over the edge in seeking to make employees redundant. We hope this won't happen, but there is a chance.
What does the Government say?
Chancellor Rishi Sunak said: "Our top priority has always been to support people, protect jobs and businesses through this crisis. The furlough and self-employment schemes have been a lifeline for millions of people and businesses.
"We stood behind Britain's businesses and workers as we came into this crisis and we stand behind them as we come through the other side.
"Now, as we begin to reopen our country and kick-start our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world."