New flexible furlough rules from September 1 explained – including how much employers must pay
BIG changes are coming into force next month for the millions of workers still on furlough due to the coronavirus crisis as employers will have to start contributing more cash towards the scheme.
Here's what you need to know.
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How does furlough currently work?
At present, furloughed workers who can't do their jobs due to the crisis get 80% of their salaries covered by the government up to £2,500 a month.
Until this month, the government has also covered the cost of employers' national insurance and pension contributions, although bosses had to start coughing up for this from August 1.
This means employers are currently paying about 5% of employment costs.
How is furlough changing from September?
From September 1, the government's contribution towards furloughed workers' wages will fall from 80% to 70%, up to a cap of £2,187.50 a month.
This means employers will have to pay 10% of salaries to make up the rest of the 80% of wages the scheme pays, up to a cap of £2,500 a month.
With September's changes, employers' bills will rise to 14% of staff costs, according to the government.
What is furlough?
THE aim of the government’s job retention scheme is to save one million workers from becoming unemployed due to the coronavirus crisis.
Under the scheme, until August 31 the government will pay 80% – up to £2,500 a month – of wages of an employee who can’t work because of the impact of coronavirus.
Workers will be kept on the payroll rather than being laid off.
Until August 1, the government also paid the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions on top, although employers have to pay these from August.
The scheme has been extended to run until the end of October and can be backdated to March 1, 2020.
It’s available to all employees that started a PAYE payroll scheme on or before March 19, 2020, although it closed to new entrants in June.
Previous rules meant that staff couldn't undertake any work for their employers while on furlough.
But from July 1, staff members were allowed to go back part-time and they must be paid in full for the hours that they work.
From September 1, employers will have to start contributing 10% of wages, with the government paying the remaining 70%.
And from October 1, employers need to foot 20% of the bill, with the government making up the remaining 60%.
But while furloughed workers won't actually see any change in what they're being paid – as it's only who's paying that's different – the pressure on employers to cough up more may push firms into making redundancies.
MoneySavingExpert.com founder Martin Lewis, for example, has previously warned that employers will start making hundreds of thousands of people redundant if they can't afford payments.
Can I be made redundant if I’m on furlough?
EVEN though furlough is designed to keep workers employed, unfortunately it doesn’t protect you from being made redundant.
But it doesn't affect your redundancy pay rights if you are let go from your job amid the coronavirus crisis.
Your employer should still carry out a fair redundancy process.
You will be entitled to be consulted on the redundancy lay-off first and to receive a statutory redundancy payment, as long as you've been working somewhere for at least two years.
How much you're entitled to depends on your age and length of service, although this is capped at 20 years. You'll get:
- Half a week’s pay for each full year you were under 22,
- One week’s pay for each full year you were 22 or older, but under 41,
- One and half week’s pay for each full year you were 41 or older.
Sadly, you won't be entitled to a payout if you've been working for your employer for fewer than two years.
There should be a period of collective consultation as well as time for individual ones if your employer wants to make 20 or more employees redundant within 90 days or each other.
You are also entitled to appeal the decision by claiming unfair dismissal within three months of being let go.
If you're made redundant after your company has gone into administration you can claim redundancy pay via Gov.uk.
Is furlough changing again in October?
Yes, furlough is changing again in October and it's feared this will only exacerbate problems for struggling firms.
That's because from October 1, the government's contribution will fall from 70% of wages to 60% of wages up to a cap of £1,875 a month.
This will see businesses having to pay 20% of salaries to make up it up to 80% in total up to a cap of £2,500 a month.
It means employers footing the bill for 23% of employment costs before the scheme ends on October 31 after which employers will be liable for 100% of staff costs.
The government hopes to combat possible redundancies with the launch of a new £1,000-bonus for employers who take back furloughed workers and employ them continuously through to January 31, 2021.
Announced in July's mini-Budget, the £1,000 bonus will be paid by the government to bosses who take back furloughed workers and pay them at least £520 on average in each month from November to the end of January.
As of July 1, furloughed workers are allowed to work part-time for their employer while remaining signed up to the job protection scheme.
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