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Furlough Scheme Begins to be Phased Out

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In March 2021, it was announced that the Coronavirus Job Retention Scheme (CJRS) would be extended until 30 September 2021, following a series of previous extensions. The CJRS allows employers to furlough their staff and apply for a grant that covers 80% of their usual wage, up to £2,500 per month. However, the contribution that the UK Government is making decreased on 1 July 2021.

The creation of the CJRS was announced on 20 March 2020, shortly before the UK went into lockdown. It was initially due to run only until 31 May 2020. However, following the extension of coronavirus restrictions and imposition of further lockdowns, the scheme was extended on six occasions and the rules on what employers can claim under the CJRS have also been amended several times.

In Wales, it is estimated that there are still around 88,000 people on either full-time or part-time furlough (down from a high of 378,000 a year earlier), who may be affected when the CJRS comes to an end. However, following the UK Government’s announcement about the lifting of remaining coronavirus restrictions in England on 19 July, it is now very unlikely that the CJRS will be extended anywhere in the UK beyond 30 September 2021 and the phasing out of the scheme commenced on 1 July 2021.

From 1 July, the CJRS works as follows:

  • The level of grant has been reduced, and employers will be asked to contribute to their furloughed employees’ wages. The UK Government will continue to contribute to furloughed wages, but this will now be 70% of an employee’s usual wage up to £2,187.50 per month – rather than 80% up to £2,500 per month.
  • Employers will be required to top up the additional 10%, up to £312.50 per month.
  • Employers will also continue to be responsible for the cost of the employer National Insurance and pension contributions that apply on top of employees’ wages (this has been the case since August 2020).
  • Employees can still be furloughed on either a full-time or part-time basis.

As always, employers may continue to top up employee wages above 80% at their own expense.

The Government’s contribution is due to decrease further to 60% of an employee’s wages and the employer’s contribution will increase to 20% as of 1 August 2021.

Employers who still have furloughed staff will need to plan for these increased contributions and consider how they intend to manage the end of furlough, including consulting with their staff.