Furlough scheme: Will we see further changes?

Solicitor Andrea Corr, in Blandy & Blandy’s Employment Law team, looks at whether any further changes or an extension to the “Furlough Scheme” are likely, while providing a reminder of the support available for employers and employees.

Following Prime Minister Boris Johnson’s announcement on 14 June that the further lifting of restrictions will be deferred by at least four weeks, bodies including the British Chamber of Commerce have called for a delay to the winding down of the “Furlough Scheme”.

HM Treasury has previously described the Coronavirus Job Retention Scheme as “one of the most generous in the world” and Chancellor Rishi Sunak reiterated this week that the Scheme has “supported over 11.5 million jobs” at a cost of almost £65 billion since its launch last spring.

The current situation

Recent figures had provided slightly better news than anticipated, with the Office for National Statistics’ (ONS) data showing that there were 1.6 million people unemployed in the first quarter of 2021, down from 1.7 million in the three months to February. In March last year, prior to the pandemic, that figure was around 1.3 million and the UK’s unemployment rate was at 4%. HMRC also revealed that 200,000 people were added to UK payrolls in May.

The Bank of England’s latest forecast suggests a peak unemployment rate of 5.5% later this year, as the Furlough Scheme ends, up from the current 4.7%. That would represent a far better outcome than many sources had predicted this time last year. In July 2020, the Office for Budget Responsibility (OBR) anticipated that unemployment would peak at 11.9%. Around 3.4 million workers remain on furlough.

Asked this week if changes to the Furlough Scheme could be expected, the Treasury responded: “The Furlough Scheme is in place until September – we deliberately went long with our support to provide certainty to people and businesses over the summer.

The Treasury added: “The number of people on the Furlough Scheme has already fallen to the lowest level this year, with more than 1 million coming off the scheme in March and April – showing our plan for jobs is working. Businesses can also continue to access other support including business rates cuts, VAT cuts and our recovery loan scheme.”

The support available for employers and employees

Until 30 June 2021, the Government will continue to pay 80% of a worker’s current salary for hours not worked, up to a maximum of £2,500 (gross). Employers will only be required to cover National Insurance (NI) and employer pension contributions. As before, employers can decide to top up an employee’s wages. In July, employers will be expected to contribute 10% of an employee’s wages for hours not worked, rising to 20% in August and September, in addition to NI and pension contributions.

 

How we can help

Specialist advice relating to the Furlough Scheme, for both employees and employers, is available from our Employment Law team. We can also advise on areas including workforce restructuring and redundancies, unfair dismissal claims and any other aspect of employment.

For further information, please visit www.blandy.co.uk.