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Budget 2021: Furlough scheme to be extended until September

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Written by: Emma Lunn
03/03/2021
The Coronavirus Jobs Retention Scheme will run until the end of September, chancellor Rishi Sunak has announced.

The furlough scheme was first introduced by Sunak in March 2020, when the government paid 80% of furloughed workers’ wages up to a monthly maximum of £2,500.

Employees on furlough will still receive 80% of their wages until the scheme ends – but employers will gradually pay more.

Between now and 30 June, the government will pay 80% of wages for hours not worked, up to £2,500 a month. Employers will be asked to cover national insurance and employer pension contributions.

But in July the government will only pay 70%, with employers expected to pay the remaining 10%, plus national insurance and employer pension contributions.

In August and September the state will pay 60% and employers will have to pay 20%.

Workers can either be on full-time furlough, or work part-time and be furloughed for the hours not worked. Your employer will have to cover wages at the normal rate for any hours worked.

The scheme was extended until the end of April in December – it was previously meant to end in March, following several extensions.

Sunak also announced fourth and fifth Self Employment Income Support Scheme (SEISS) grants for self-employed workers, and widened eligibility for the scheme.

Kate Palmer, HR advice and consultancy director at Peninsula, said: “An interesting development is that, once again, employers will be asked to start contributing to the scheme from July, something that we previously saw introduced last year as the government aimed to wind the scheme down before it was extended.

“Whilst this may at first glance be concerning for employers, they should remember that by July, the government is aiming for life to be, essentially, much more normal, and likely anticipate the need to use the scheme will be much diminished. However, whether this means they will start to clamp down on who can actually use it following 21 June does remain to be seen.”

James Andrews, personal finance expert at money.co.uk, said: “Following several days of speculation and debate surrounding the future of furlough, the chancellor has announced that the scheme is to be extended beyond April, up until the end of September 2021.

“But while workers will be able to receive the same amount of money all the way through to October, 80% of their wages up to £2,500 a month, it will start getting less generous for employers from the end of June, by which time lockdown restrictions are expected to be over.

“In July employers will be expected to contribute 10% of a furloughed employee’s wages for the hours they aren’t working, while in August and September that will rise to 20%.

“Bosses will also have to pay pension and National Insurance contributions for furloughed staff.”

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