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Significant changes to the Furlough Scheme made on 1 July require employers to now make a minimum contribution of 10% to furloughed employees’ salaries.

The recent changes mark the next step in a phasing out of the Furlough Scheme before it ends completely on 30 September.

How Did the Furlough Scheme Change on 1 July?

Previously the government paid up to 80% of the wages for furloughed workers (up to a cap of £2,500 per month), but from 1 July the government contribution reduced to 70%, which means that all employers must pay at least 10% of their employees’ salaries (it is optional for employers to pay out the remaining 20%). During July, the government will only pay a 70% contribution up to a maximum of £2,187.50 per month.

In August and September, government contributions to furloughed workers’ salaries will be tapered off further, paying out 60% in each month up to a total salary cap of £1,875 per month. From 1 August until the end of the Scheme on 30 September, employers will therefore have to cover at least 20% of their furloughed staff’s wages.

The gradual phasing out of the Furlough Scheme is thought to encourage businesses to bring their staff back to work as soon as possible.

How Will the Changes to the Furlough Scheme Affect Businesses?

Businesses will now have to begin paying a proportion of furloughed workers’ salaries which, for many, will mean additional costs at a time when business has not returned to pre-pandemic levels. However, the government’s rationale to this change is that, as all restrictive lockdown measures are due to come to an end on 19 July, all businesses should be able to return to trading at pre-COVID capacity.

In any case, from 30 September, no government grants will be provided to businesses to help them cover staff salaries.

How Do the Changes to the Scheme Affect Employees?

Furloughed employees should not be affected by the changes to the Scheme. The government has mandated that employers must make up the difference so that you receive a minimum of 80% of your full salary.

Many furloughed workers may be concerned of risks to their jobs following the end of the Scheme on 30 September, however The Bank of England and the Office for Budget Responsibility have estimated only a small increase in unemployment after this point.

As the Furlough Scheme gradually comes to an end, many employers and employees alike may, understandably, have concerns about the future of their businesses and livelihoods. Our Employment team can offer advice and services on a range of both contentious and non-contentious employment matters. Please get in touch at enquiries@lawstep.co.uk if you would like to seek advice.