Save, make, understand money

Household Bills

Furlough changes take effect from today

Emma Lunn
Written By:
Emma Lunn

Employers now have to start paying national insurance, pension contributions and 10% of staff wages.

Changes to the Coronavirus Jobs Retention Scheme take effect from today as the government reduces its contributions.

Up until now the government has paid 80% of furloughed staff’s wages up to a cap of £2,500 a month. Until 1 August, employers had also been able to claim national insurance contributions and employer pension contributions from the Treasury.

But from 1 September, the government will only pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough.

Employers have to top up wages so that workers receive 80% of their usual pay, up to a cap of £2,500 a month, for the time they are furloughed. Companies also have to pay national insurance and pension contributions for their workers.

With September’s changes, employers’ bills will rise to 14% of normal staff costs, according to government calculations.

The furlough scheme is available to all employees running a PAYE payroll scheme on or before 19 March, although it closed to new entrants in June.

Redundancy threat

Furloughed workers won’t actually see any change in what they’re being paid this month – but the added burden on employers means some companies may make redundancies.

Mike Cherry, national chairman of the Federation of Small Businesses, said: “The Job Retention Scheme has been a huge success, protecting livelihoods and the futures of businesses all over the country. We now have to avoid a scenario where its wind down triggers mass unemployment.

“Sadly, thousands of jobs have already been lost. This crisis has changed the commercial world for the long-term and future job creation now has to be a priority, particularly for those who are currently out of work.”

Changes in October

The furlough scheme will change again on 1 October. From that date the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough.

Employers will pay national insurance and pension contributions for their workers, as well as topping up employees’ pay packets to ensure they receive 80% of their wages up to a monthly cap of £2,500.

This means employers will be liable for 23% of employment costs for staff who are unable to work.

Employers are being incentivised to bring furloughed employees back to work, and to continue to employ them. The Job Retention Bonus will provide a £1,000 one-off payment to UK employers for every furloughed employee they bring back and who remain continuously employed until the end of January 2021.