Government contributions for workers on the job retentions scheme will fall again from this month, as the Chancellor prepares to axe support for good this autumn.
From today, the Treasury’s support will drop from 70% to 60%, prompting employers to start paying a minimum of 20% per employee, plus national insurance and pension contributions on top.
It’s part of a scale back of the scheme before it’s wound down for good this autumn, alongside the closure of the fifth SEISS grant for self employed workers.
From August 1, employers will have to pay 20% of wages for staff on furlough. That contribution level will continue until the scheme ends at the end of September, the Treasury said.
Under the changes, the government will contribute 60% of wages up to a maximum cap of £1,875 for the hours the employee is on furlough.
“The Coronavirus Job Retention Scheme (furlough scheme) was put in place to support employers who are not able to operate as normal due to the pandemic,“ said Kate Palmer, employment expert at HR consultancy Peninsula.
“By designating employees as “furloughed”, employers have been able to recover a portion of employee wage costs up to a £2,500 cap.
“As confirmed by the Government Budget delivered on March 3, 2021, the scheme will continue to operate until the end of September 2021."
From August 1, 2021, until the scheme ends, the Government’s grant will drop to 60% of furloughed employees’ wages for their unworked hours at a cap of £1,875.
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“With the 80% rule still intact, employers will need to contribute 20% to staff wages up to £625,“ Palmer added.
Those on flexible furlough (working only some hours), will be paid in full by their employer for the hours they work, and the grant will cover 80% of pay for their unworked hours only, subject to a cap which is less than £2,500.
“Through to the end of September, employers will also have to cover national insurance and pension contributions.”
In total, almost three million people have moved off the furlough scheme since March this year when businesses reopened.
However, the latest full results show as 1.9million people were still on the scheme at the end of June.
That’s still low, compared to a peak of nearly nine million at the height of the pandemic in May last year.
In the last three months, younger people have moved off the scheme twice as fast as all other age brackets, with almost 600,000 under 25s moving off the scheme, Treasury figures show.
Jobs in sectors including hospitality and retail are now moving off the scheme the fastest - with more than a million coming off the scheme in the last three months.
However industry insiders say the cut off is still too soon.
The New Economics Foundation (NEF) estimates 600,000 workers could be at-risk of redundancy or a reduction in hours or pay when the support culminates next month.
It said the additional 20% employer contribution will not be cost-effective for around one-third of furloughed jobs – equivalent to 250,000 workers.
The NEF report also found that without the current extension, as many as 3million jobs could have been lost.
