For many of us – employees and business owners alike – furlough has been a lifeline this past eighteen months. It has meant many of us can carry on paying our staff or receiving a wage at a time of great difficulty, when we were very worried about what would happen across a lot of industries.
Coronavirus shut down restaurants, bars, gyms, and shops, and lots of people were very concerned about what that would mean for their jobs. Employers were worried about how they would pay their staff. Enter furlough, which meant that the government agreed to pay a certain percentage of salary for staff who couldn’t work because of these extraordinary circumstances.
But furlough is about to change. If you’re still receiving it – or if your staff are – you need to know how coronavirus job retention, or ‘furlough’, is changing in July 2021.
The latest furlough statistics
Not everyone who was on furlough is on it now. In January, when furlough payments were at their peak, 5.1 million people in Britain were receiving furlough, and we’ve seen this reduce since the lockdown eased. But the statistics are still high. In May 2021, 2.4 million people were on furlough, and 30% of employers were using the scheme to pay at least some of their staff.
The food and drink sector saw the biggest reduction in staff on furlough in the number of jobs on furlough in May, whereas air travel and tourism saw the highest number of jobs being put on furlough.
So this is a really important scheme for many. An incredible 11.6 million people’s jobs have been saved by furlough since the pandemic began in 2020.
How is furlough changing?
Furlough was introduced in spring 2020 and was effective in stopping people from being laid off during the virus. It was feared in the beginning that one in ten people would lose their jobs, but the current unemployment rate is sitting at more like one in twenty.
The government agreed to pay 80% of the wages of people if they could not work (for example if they were at a high risk of contracting Covid-19 and becoming seriously ill) or if their employers could no longer afford to pay them. This was only up to a limit of £2,500, so it was not so good for those on a very high wage. However, for most people, it was a lifeline.
Now, the rules are changing.
From July 1st 2021, the government will only pay 70% of salaries, and employers will need to pay the other 10%.
In August and September 2021, the government will pay 60%, and employers will be expected to pay the other 20%.
That’s good news for workers, who will not notice the difference. The cap is staying at £2,500, so if you are receiving furlough, you shouldn’t notice any difference at all. If you’re an employer, you will, because you’ll have to pay extra money in order to meet the requirements of furlough.
Why are these changes happening?
Changes are occurring because the government wants to urge employers to bring employees back to work full time. They’ve already had to pay pension and National Insurance contributions on behalf of employees on furlough, so this extra push is going to add even more strain to finances, and employers might think it’s just worthwhile to invite their employees back to work.
How will this affect my bank balance?
If you’re an employer, you might be wondering how this will impact you in real terms. Well, on average the cost of keeping a staff member in furlough will rise from £155 per month to £322.
If you’re paying that anyway and going without your staff member, you might think it makes more sense just to bring back your employee. That’s what the government is hoping for.
How long will furlough continue?
At the moment, the furlough scheme is set to continue until September 30th. There is every chance it will be extended should the virus mutate and force us into another difficult circumstance.
But if things keep going the way they are, furlough will end, and many employers will be stuck with a difficult decision. The pandemic has undoubtedly rocked almost every sector, and lots of companies are not in a position to take back their staff, and have been keeping them employed only because they’ve been able to do it because of furlough.
Through this difficult time, you might need a lawyer to help you make contractual decisions without landing yourself in hot water. If this is the case, we can help.Contact JMR Solicitors for more information, by calling 0161 491 3933 or emailing firstname.lastname@example.org.