Changes to the furlough scheme from 1 July 2021 - what you need to know

The Coronavirus Job Retention Scheme is due to end on 30 September 2021. As we reported in March, in order to phase out the scheme as we approach the end of September, the level of government grant will reduce and the amount employers need to contribute towards the cost of furloughed employees’ wages, will increase in stages. The employer’s contribution will increase from today, 1 July 2021. In July, the employer must pay 10% for unworked hours plus employer NICs and pension contributions. In August and September, the employer contribution will increase to 20%.

The Employers' CJRS guidance, the Employees' CJRS guidance and the Claim guide were updated by HM Revenue & Customs on 17 June 2021. They confirm that, from 1 July 2021:

• The Government will pay 70% of wages up to a maximum of £2,187.50 for the hours that the employee is on furlough.
• To be eligible for the government grant, employers will be required to top up the wages of employees on furlough to ensure they continue to receive 80% of wages (up to a maximum of £2,500) in total for the hours the employee is on furlough.
• The wage caps are proportional to the hours not worked.

The table below, from the HMRC guidance, shows the level of government contribution available in each month, the required employer contribution and the amount that the employee receives per month where the employee is furloughed 100% of the time.

The guidance has also been updated to specify that claims for furlough days in June 2021 must be made by 14 July 2021.For businesses that have been topping up employees’ wages above the 80% total - that can continue.

What does this mean for employers?

When the Prime Minister announced a four week delay in lifting remaining lockdown restrictions to 19 July, 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. The Government has now confirmed that the reduction in government support will also go ahead from 1 July as originally planned. 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.