CJRS – changes to payments and the furlough scheme

CJRS – changes to payments and the furlough scheme

The Coronavirus Job Retention Scheme (CJRS) continues to support many businesses, who are reliant on the financial support it offers to cover the costs of staff on furlough.

Extended earlier this year in the Budget, support from the CJRS will slowly be withdrawn in the next three months before closing altogether at the end of September.

The withdrawal of this scheme could have a substantial financial impact on businesses and so they must be prepared for the changes ahead.

As with the existing scheme, furloughed employees continue to receive 80 per cent of their usual wages capped at £2,500 a month, or equivalent weekly or daily figures, for usual hours not worked right up until the scheme ends later this year.

From 1 July, employers must make a 10 per cent contribution to these costs, as the Government grant will only cover 70 per cent of the costs (capped at £2,187.50).

In August and September, the Government grant will then drop again to 60 per cent (capped at £1,875), meaning that employers must make a 20 per cent contribution to the amount paid to employees.

The calculation of usual wages is still based on the last pay period before the employee became eligible for furlough.

Those dates vary, depending on whether the employee was reported to HMRC on or before 19 March 2020, 30 October 2020 or 2 March 2021.

Any pay rises since an employee’s reference date are not taken into account for any time they are furloughed. However, if an employee is on flexible furlough you must continue to pay them for the hours / days worked at their current daily rate; this may differ from the furloughed rate and will take into account pay-rises, unlike the claim.

Employers need to make early assessments as to whether they will continue to support furloughed employees going forward, especially if they are considering making redundancies as a result of the withdrawal of funding.

Employers need to remain mindful that if they need to make any redundancies, adequate notice needs to be given to the employee(s) as furlough cannot be claimed during the redundancy notice period and the employer will be liable for the associated costs.

If you need assistance with the changes ahead or are concerned about the potential cost implications of the furlough scheme ending, please contact us.

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