The Chancellor, Rishi Sunak, recently announced that the Government job retention furlough scheme will be extended to the end of October. The scheme was previously only set to end on 30 June.
Speaking in the House of Commons on 12 May 2020, the Chancellor said that the scheme will run with “no changes whatsoever” but it would continue from August until the end of October, the new date to end the scheme, but with greater flexibility to support the transition back to work. This in turn means that employers will be able to use the scheme to bring employees back to work part-time.
In essence, employers and Government will share the cost of paying salaries starting from 1st August – an indication that the level of state subsidy will gradually taper away.
Full details of how the scheme will work from August to end of October will be made available by the end of May 2020.
What is the furlough scheme and how it works now?
The scheme was created by the Government amid the coronavirus pandemic to support employers pay their workers salaries during lockdown if there is no work for them or they cannot work from home. The scheme’s official name is Corona Virus Job Retention Scheme.
It essentially provides an employee with a leave of absence from work. The employee remains on the employer’s payroll during the lockdown period and when lockdown eases and the economy reopens they can instantly restart work. The scheme has essentially prevented a sharp rise in unemployment rates.
Here is how the scheme works in brief:
• The Government pays the employer 80% of employee salary, up to £2,500 month. The scheme opened to employers on Monday 20 April, with the first payments being made within a few days. Employers could backdate claims to the beginning of March.
• Employees must have been on the employer’s payroll on 19 March 2020 to be eligible for furlough.
• The employer can choose to top up government grant. That means that the employer may choose to pay the employee’s salary but this optional and it is up to the employer and its financial position.
• It is up to the employer to choose who is furloughed and why. This means that an employee may be furloughed because the employee has no work to do, or that person cannot work from home. It may also be that the employee must be at home looking after children or self-isolating.
At the end of the furlough period, the employee remains employed by the employer. The employer must either provide the employee with work or start a process to terminate their employment.
Redfern Legal LLP is happy to answer any questions you may have on employment issues.