The Coronavirus Job Retention Scheme (CJRS) also known as the furlough scheme will be changing as of 1st July 2021, what does this mean for employers?
Since May 2021 eligible employers have been able to claim 80% of an employee’s wages (subject to the maximum cap) for any hours not worked and spent on furlough due to the Covid-19 pandemic through the furlough scheme. From the 1st July 2021 this will change and the amount an employer will be able to claim through the Government scheme reduces to 70%.
However, the employer is required to contribute 10% of the employees’ wage along with paying the National insurance contributions and pension contributions as normal. This means that the employee will continue to receive 80% of their pay for any hours not worked and spent on furlough.
From the 1st August until the end of the scheme which is currently scheduled to be 30th September 2021, the level of the grant an employer will receive from the furlough scheme reduces again from 70% to 60%. Again, the employer is required to contribute to the employees’ wages, the contribution for August and September is 20% along with paying National insurance contributions and pension contributions as normal.
Does an employer need to top up the employees’ wages whilst on furlough to 80%?
Yes, any employer who will be utilising the furlough scheme in July, August and September will be required to contribute to an employee’s wages for time spent on furlough to ensure they do not receive less than 80% of their wages during this time.
The Government have clearly stated that in order for an employer to be eligible to receive the grant they must continue paying their furlough employees 80% of their wages for any time spent on furlough.
See table below showing the relevant contributions.
|July 2021||August 2021||September 2021|
|Governments contributions for wages not worked||70% up to £2,187.50||60% up to £1,875||60% up to £1,875|
|Employer contribution wages for hours not worked||10% up to £312.50||20% up to £625||20% up to £625|
|Employer contribution: employer National Insurance contributions and pension contributions||Yes||Yes||Yes|
|For hours not worked employee receives||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month|
What will happen if an employer doesn’t contribute to an employee’s wage whilst on furlough from July?
The employer could see themselves in an employment tribunal as an employee could make an unfair deduction of wages claim, the employee does not need to have the requisite two years’ service to make this claim.
Employees are encouraged by the Government and HMRC to report furlough fraud and misuse of the furlough scheme. If an employer decides not to contribute to make the required contribution this may fall under the scope of furlough fraud or misuse, which could result in an investigation by HMRC. The employer may also be required to repay the amount they have claimed and may have their name publicly shared by HMRC and other sources for misuse of the furlough scheme.
Does an employer need to pay NI and pension contributions?
Yes, however the employer should have been paying this as normal since May 2021 as this was when the Government extended the furlough scheme and issued new guidance.
What does an employer need to pay for hours worked?
Employers still need to pay 100% of the employees wages for anytime spent at work, this requirement has not changed.
What happens if an employer is unable to pay the required contributions to an employees pay for time spent on furlough?
Unfortunately, the employer will be unable to utilise the furlough scheme as it is a requirement to pay the contributions set by the Government. The employer may want to start looking at potentially placing their staff on lay-off or short time working as a way to avoid redundancy, however the employer must ensure they follow the correct process for lay-off and short-time working. If there is no provision in the employees’ contract to place them on lay-off or short time working, then the employee will need to agree to this.
If the employer is unable to utilise the scheme or place employees on lay-off or short-time working, then they may be looking at a potential redundancy situation and must follow the relevant legislation and guidance on making redundancies.
As throughout the existence of the scheme there is no right for an employee to demand to be on furlough and to receive furlough payments.
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