Business

What might changes to the furlough scheme mean for you?

The furlough scheme has been a lifeline to workers, especially those in sectors like hospitality
Malachy McLernon

QUESTION: What changes are coming to the Coronavirus Job Retention Scheme in July and August and what do I need to be aware of as staff members start returning to the city centre café that I run?

ANSWER: The CJRS, often referred to as the furlough scheme, has been extended until the end of September, with significant changes introduced from July 1.

Since March 2020, the scheme has provided vital support to employers who have been impacted by the coronavirus pandemic and has supported almost 12 million jobs across the UK.

From July 1 the percentage of employee wages covered by the government was reduced as part of the gradual return to the workplace which is beginning to happen across the UK.

The amount the government will contribute towards the employee wage for the time the employee is on furlough has been reduced to 70 per cent, with a maximum government contribution of £2,187.50 a month. It is then the responsibility of the employer to provide the remaining 10 per cent, a cost of up to £312.50 per month for hours spent not working.

During this time, employers must also continue to pay the employee ER National Insurance Contributions (NICs) and Pension contributions for the hours the employee is on furlough.

From August, the government will reduce their contribution to cover 60 per cent of the employee wage up to £1,875 per month for the time the employee is on furlough. The remaining 20 per cent must be topped up by the employer and ER NICs and Pension contributions must continue to be paid by the employer.

From September, the government will continue to pay 60 per cent of the employee wage for the time the employee is on furlough and the employer will continue to top up the remaining 20 per cent as well as pay ER NICs and Pension contributions. At the end of September, the current furlough scheme will end.

The changes to the CJRS serve as part of a gradual return to the workplace. The financial burden on the treasury will be eased, yet employers will still receive some support from the government in paying employees’ wages up until the end of the scheme on September 30.

Despite the changes in government contribution, it’s important to note that the level of support employees receive (80 per cent of their usual pay) will not change until the scheme ends in September.

When the government announced recently a four-week delay in lifting remaining lockdown restrictions in England to July 19, at the earliest, many questioned whether the furlough scheme would also be extended.

However, the government confirmed that it would not, despite some industries - principally the hospitality and travel industries - still being heavily impacted by the restrictions.

There are fears about a significant rise in unemployment when the furlough scheme ends and this increase in employer contribution to furlough pay may mean some employers, who are unable to afford to keep staff on furlough, may commence redundancies sooner.

Only time will tell how many businesses will come through the challenges they face once the furlough scheme has come to an end.

:: Malachy McLernon (m.mclernon@pkffpm.com) is a director of PKF-FPM (pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

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