What is the position currently?
Since the Furlough Scheme was launched it has been used by one million businesses to support 8.5 million jobs at a cost to the Treasury of £15 billion so far, according to the Money Section of the Daily Telegraph (30 May 2020). Treasury estimates suggest it is costing £10 billion every month and is expected to leave the Government with an expected bill of around £80 billion.
The Furlough Scheme will continue to work as normal with the Government paying 80% of salary up to £2,500 per month to furloughed employees together with National Insurance and minimum employer pension contributions.
What is changing?
From 1 July 2020 employees will be able to return to work on a part-time basis. The salaries for days worked will be paid by the employer and the Government will top up their pay for the days they are furloughed to the standard 80% rate for July and August under a new ‘Flexible Furlough Scheme’.
An employee returns to work for two days and is furloughed for three. The employer pays 100% of their salary for their two days at work while the Government will pay 80% of their salary for the three days furloughed in July and August.
From 1 August 2020 employers will be asked to contribute to the cost of the Scheme and be required to start paying National Insurance Contributions and auto-enrolment pension contributions on the furlough pay.
From 1 September 2020 in addition to the above contributions, employers will be required to pay 10% of salaries for the furloughed days with the Government paying 70% up to a cap of £2,187 monthly.
From 1 October 2020 employers will be required to pay 20% of salaries for the furloughed days with the Government paying 60% up to a cap of £1,875 monthly.
Can anyone apply for the Flexible Furlough Scheme?
No. Only those already using the current Furlough Scheme will be able to apply for the Flexible Furlough Scheme when it is introduced on 1 July 2020. This is because it is designed to bring back those already furloughed into part-time work.
How long will the Flexible Furlough Scheme last?
It will last until 31 October 2020 alongside the regular Furlough System.
An uptick in redundancies?
The requirement for employers to pay National Insurance and auto-enrolment pension contributions on furlough salary from 1 August could lead to an uptick in redundancies. For those affected, where possible, pension contributions paid either personally or by redundancy sacrifice should be a consideration whilst markets are down.
How Tilney can help
Tilney’s financial planners are helping those coping with furloughing and redundancy. We offer free initial consultations as a way for you to discuss your personal circumstances, find out more about the options available and learn how Tilney could help. If you would like to book a consultation please use the online form or call us on 020 7189 2400.
This article was previously published on Tilney prior to the launch of Evelyn Partners.