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Key decision due

Firms facing 10 June deadline on furloughed staff

Rishi Sunak: revised scheme

Businesses have until 10 June to decide which employees it will retain following the Chancellor’s changes to the furlough scheme.

Next Wednesday is the deadline for businesses to take advantage of Rishi Sunak’s new scheme which allows employees to work part-time.

Only those who have been furloughed for three weeks before 30 June are eligible to take part.

Further guidance is expected on 12 June, but current plans mean the employee will be paid their full-time rate for the hours worked and the furlough rate of pay for the hours they are not working. 

For example, for an employee earning £24,000 a year, or £2,000 per month, who works two days per week from 1 July, the employer will pay £800 per month (40% x £2,000) and the grant which can be claimed will be £960 (60% x £2,000 x 80%). In September, the employer will contribute 1/8 of the £960 furlough grant, plus pay all of the relevant NIC and pension costs.

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Andrew Sanford, a business advisory partner at tax and advisory firm Blick Rothenberg. said: “Regrettably, with the additional costs of furloughing staff, and the inevitable restrictions likely to be in place post lockdown, businesses will have to consider whether it is economically viable to continue furloughing all of their staff and many may be made redundant.”

He added: “The redundancy consultation process can take up to 45 days, and there is a requirement to pay at full rate during any statutory notice pay periods.”

Sanford said that the Chancellor’s announcement on 29 May on the extension of the job retention scheme offered more support for businesses than was originally envisaged. Rates of contributions from businesses were lower than expected, and there was a commitment to having part – time Furlough arrangements with effect from 1 July.

In August, businesses will have to cover the Employers National Insurance and pension costs of the claim. This typically amounts to 5% of the claim but can vary as for low paid employees there may be no National Insurance or pension contributions to make.

There are some additional costs that may be incurred

– Andrew Sandford, Blick Rothenberg

In September the employer will be additionally responsible for 1/8 of the furlough pay, increasing to 1/4 of the furlough pay in October. For an employee who is receiving £2,500 of furlough pay currently, if they were still on furlough in September, the employer would pay £312.50 plus the associated employer’s National Insurance and pension contribution and the government would pay £2,187.50.

Mr Sandford notes: “There are some additional costs that may be incurred, existing benefits such as health insurance, death in service benefit and company car if applicable, any employer pensions payments over the basic 3% rate, any salary top up payments, over and above the furlough entitlement, including the resultant NIC and pension payments, holiday pay and accrued holiday leave.

“Where an employee takes holiday during a furlough period, they will be entitled to their full salary for any days taken. This means that employers will need to top-up the furlough amount for holidays and bank holidays.

“Employers may prefer to ask employees to take time off in lieu when the employee returns to work, but this should be discussed and agreed with the employee. Holiday entitlement will continue to accrue while an employee is on furlough. many furloughed employees may not take a holiday. This therefore represents an ever-increasing cost to the employer.”

There are three tests that must be fulfilled when considering part-time furlough. For an employee to be on furlough in July, they must have been previously furloughed. Given the minimum period for furlough is three weeks the latest an employee can be furloughed is from 10 June.

There is also a condition that from 1 July a company cannot have more employees on furlough than it had in previous claim periods.

Employers considering furloughing additional staff will need to start the consultation immediately in order to meet the 10 June deadline, and to give the furloughed staff adequate notice. For those businesses which have not yet made any claims, all claims for periods up to 30 June must be submitted by 31 July.

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