How to meet new furlough rules

From 1st September, the government’s furlough scheme is set to transform. And the coming changes could hit your wallet hard—or hand you a hefty cash bonus.

Here’s what you need to know to prepare your business for the new rules.

The changes so far... 

In March, the government set up the Job Retention Scheme to reduce redundancies during the COVID-19 outbreak.

And until the end of June, the scheme’s rules stayed the same. The government paid 80% of each furloughed worker’s wages (up to £2,500 per month), plus employer National Insurance and pension contributions.

Then, from July, employers could bring workers back part-time (learn more in Peninsula’s flexible furlough guide). And August saw businesses begin paying employer National Insurance and pension contributions for employees still on furlough.

But now the government has cut the grants further. From 1st September, you need to start paying towards your furloughed workers’ wages. Even more so by October.

Let’s look at the specific changes that affect you. 

The rules arriving this autumn 

From September, the government will pay only 70% of your furloughed workers’ wages (up to £2,187.50 per month).

You, the employer, will then need to top up your workers’ wages so they receive at least 80% of their normal pay (up to £2,500). You’ll also need to pay employer National Insurance and pension contributions for the hours the employees are on furlough.

Then, in October, the government will cut its wage contribution to 60% (to a cap of £1,875). Again, you’ll need to top this up to 80% of your workers’ normal pay, plus pay employer National Insurance and pension contributions.

So far, the Chancellor of the Exchequer has ruled out extending the furlough scheme for any longer. From 1st November, financial support will stop, and you might need to make some tough cost-cutting choices.

But there’s a new incentive that may make you want to retain your workers…

£1,000 for every furloughed employee

The government has set up a system that rewards businesses who avoid making redundancies.

It’s called the Job Retention Bonus, and sees employers receive a £1,000 cash payment for each previously furloughed worker who you continue to employ after furlough ends.

We’re expecting more news on the incentive later this month. But for now, there are a handful of terms you must meet to be able to claim the bonus:

• You need to continuously employ each worker until at least the end of January 2021.
• Your worker/s must earn at least £520 per month from November.
• They need to have up-to-date Real Time Information (RTI) records until the end of January.
• They cannot be working their notice period.

(Peninsula’s free article on the Job Retention Bonus tells you all you need to know to meet the criteria and unlock your cash rewards. Click here to view the article.)

Your next steps

With the new furlough rules now in force, you’ve got some big decisions to make in a short space of time.

Will your business bounce back towards pre-lockdown trade levels, or is it still feeling the effects of the pandemic? Can you afford to pay your staff as normal, or do you need to look at cutting costs?

Whatever you decide, Peninsula has a suite of services to help protect your business through the COVID-19 outbreak and beyond:

• The furlough navigator tool from BrightHR makes it easy for you to plan wage claims, record staff details, and meet the newest rules of the Job Retention Scheme. Learn more about the navigator tool here.
• And unlimited 24/7 HR advice helps you instantly overcome any staff management challenge that you face. Try it today—claim your free advice call with an HR expert on 0800 028 2420 or through this link.