6 May 2021
CORONAVIRUS: Current Status of the Coronavirus Job Retention Scheme (Furlough)
In response to the challenges faced by businesses due to the pandemic, the government has introduced a scheme to help employers keep jobs open for employees and keep a wage coming in where the business may have had to close temporarily or the amount of work the business can do has decreased. Read our latest article below to understand the latest updates to the scheme...
How it works
The Coronavirus Job Retention Scheme, as it is now called, has been in effect since March 2020 and will continue until at least 30th September 2021. In general, the idea of the scheme is that an employee is placed on furlough for a period of time, during which, they will receive 80% of their salary or normal wages, up to a maximum of £2,500 per month. Furlough payments are still subject to tax and national insurance contributions. Employees will receive 100% of their normal pay if they cover their furlough period with annual leave, however, they are not obligated to do so.
What is happening now with furlough payments?
Currently, the government pays the 80% furlough payment, with employers only having to pay pension contributions and employers' national insurance contributions. If the employee takes annual leave during their furlough period, the employer is responsible for the top-up payment to the employee.
Since the roadmap has lockdown restrictions in England ceasing from 21st June 2021, the government will pay 70% of the furlough payments in July, with the employer paying the other 10% and in August and September, the government will pay 60% and the employer 20%.
The true cost of the Job Retention Scheme
The furlough scheme was reported to have cost the treasury £50bn in March 2021 when the budget was released and was due to end in April. However many of the sectors which had the highest proportion of furloughed staff, namely hospitality and retail, were not allowed to reopen until 12th April 2021, and even on this date, hospitality industries could only operate outside. Without the extension to the furlough scheme, these industries would have been forced to lay off staff. This would have caused the unemployment rate to continue to rise which would have its own cost implications for the treasury in lost income from taxes and increased benefits payments.
The furlough scheme has been a lifeline for many businesses and the increased flexibility introduced in the summer of 2020 where employees could be brought back to work part time and furloughed for the rest of their contracted hours enabled businesses to reopen slowly. Where staff had been completely furloughed for a long period of time, many would have needed training to get themselves up to speed on new ways of working or to rebuild their confidence after time away from work and easing back into work gradually. Training could be undertaken whilst on furlough, which would have helped this gradual return to work take place more seamlessly.
Repayment of furlough payments
The treasury is asking businesses to repay furlough payments where they have overclaimed and there is guidance on how to go about this on the HMRC website. However, businesses are also able to return furlough funding voluntarily, if they found they didn't need some or all of it after all. It is estimated in April 2021 that more than £760m of furlough payments have been returned to HMRC voluntarily by around 3,800 businesses.
Businesses are encouraged to return overclaimed furlough funding voluntarily, before the Covid Fraud taskforce cracks down more heavily and fines for knowingly overclaiming are issued which could be up to 100% of the grant. Whilst businesses are not required to demonstrate that they are in financial difficulty to claim furlough grants, there are eligibility criteria in place and businesses can face steep penalties if they claim furlough grants to which they are not entitled.
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We understand the difficulties businesses are facing during the pandemic, and have invaluable knowlege to help support you. Get in touch with us today and let us help you and your business during these difficult times. Contact our Director, Nick Bonnello, directly on 0115 964 8860 or email him at firstname.lastname@example.org to find out how we can help you across all areas of your business.
The views provided in this article are for general information purposes only. Nothing in this article represents advice of any nature whatsoever. Accordingly, RWB CA Limited does not accept any liability or responsibility for the information contained in this article or any decision or other action that may be taken in reliance upon the information contained within it. RWB CA Limited accepts no responsibility for any errors of fact or opinion and assumes no obligation to provide you with any changes to its assumptions.