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Furlough timeline explained: what you need to know

New guidance has been issued to phase out the Coronavirus Job Retention Scheme for UK employees. Our guide takes you through the detail to help inform your business planning.

This page was updated on 11 August 2020.

New guidance has been issued to phase out the Coronavirus Job Retention Scheme for UK employees. Our guide takes you through the detail to help inform your business planning.

What is the Coronavirus Job Retention Scheme?

The Coronavirus Job Retention Scheme which was introduced back in March and has already supported over 1 million businesses across the country, by providing 80% of salary for employees placed on ‘furlough’ who otherwise could have been made redundant.

The scheme allowed businesses to furlough their staff and provided no requirement for employers to top up the salaries, under the provision that furloughed staff were not able to work in any capacity whilst receiving the benefit.

According to our business survey published on 6 July, 57% of businesses in Greater Manchester had used the scheme and furloughed staff. Within this segment, approximately one in two had furloughed more than half of their staff during this period. The data also showed that the highest proportion of firms by sector to have furloughed staff were Construction, Green (Waste & Energy), Hospitality, Leisure and Tourism, and Manufacturing and Engineering.

The Scheme which has enabled many businesses to continue operating during the Coronavirus outbreak was extended on 12 May, with the Chancellor revealing the details of its second and final phase on 29 May.

Furlough timeline

 

Download furlough timeline

June

  • Government will continue to cover 80% of employee salaries including employer National Insurance and pension contributions of furloughed staff.
  • 10 June marks the final date by which an employer can furlough a staff member for the first time. This will not apply to parents returning from paternity and maternity leave as well as military reservists returning to work after a period of mobilisation after 10 June, who will still be eligible after the cut-off date, provided they work for an employer who has previously furloughed employees. 
  • From 30 June onwards, businesses will only be able to furlough employees who have already been furloughed for a full 3-week period prior to this date.
  • During the month of June, furloughed employees can not undertake any work for their employer.
  • If they choose, employers can still top up employee wages above the 80% total and £2,500 cap at their own expense.


July

  • From July 1st, the scheme becomes more flexible and employers will be given the opportunity to bring back furloughed employees for “any amount of time and any shift pattern”. Any new working arrangements will have to be discussed and agreed with the employees in writing.
  • Employers will be able to make their first claim under the new scheme from 1 July
  • Government will continue to cover 80% of staff wages as well as the employer National Insurance and pension contribution for the hours not worked.
  • Businesses will be required to pay staff for any hours worked based on their employment contract as well was pay for the tax and National Insurance costs due on those amounts. Employers will also be required to cover pension contributions for the hours worked.
  • When claiming the grant for employee hours not worked, businesses will need to:
    • calculate the amount to claim by reference to furloughed employees’ usual hours worked in a claim period
    • report the hours the furloughed employee worked including the usual hours they would be expected to work in normal circumstances in a claim period.
    • report and claim for a minimum period of a week.
  • From 1 July, claim periods will no longer be able to overlap months
  • The maximum number of employees businesses can claim for in any single claim period starting from 1 July cannot exceed the maximum number of employees they claimed for under any claim ending by 30 June.
  • 31st July will be the last day businesses can submit claims for periods ending on or before 30 June

 

 What could this mean for your business?

The introduction of flexible arrangements will provide businesses the opportunity to plan ahead for the end of the scheme in October and understand where the pinch points are. According to Caroline Monk, Executive Partner, Beever and Struthers:

“It is important to have honest conversations and take advice early. It’s back to the basics, about how businesses should think about their strategic planning looking forward. If there are casualties it will be businesses who have got stuck in the legacy of “how it was” and have not thought how they can transform the business. That transformation could very well be a change in the product, their customer base or how they market to the customers and others across this spectrum and businesses should open their eyes and embrace these opportunities.”

August

  • From August, the government will continue to cover 80% of employee salaries up to £2,500 per month
  • Employers will be required to cover the full National Insurance Contributions (ER NICs) and pension contributions
  • Employers will now be able to make a claim only if they have previously furloughed an employee before 30 June and have submitted a claim for this by 31 July (exceptions apply for staff returning from statutory parental leave). 

September

  • From September, the government will cover 70% of wages up to a cap of £2,187.50 per month for the hours the employee does not work.
  • Employers will need to cover 10% of salaries of furloughed employees to make up 80% total up to a cap of £2,500
  • Employers will be required to pay the full ER NICs and pension contributions

What could this mean for your business?

With employers required to start paying a contribution towards employee wages from September, some businesses will need an injection of cash to support their operations to ensure resilience. As Philip Hargreaves, Access to Finance Lead at the Hub noted during our recent  “The end of furlough: What happens next?” webinar:

“Things are going to change, your credit availability is going to be restricted substantially, your clients might not be able to pay you on time, so it’s about communication with suppliers, communication with clients and making sure you have a full understanding of where your cashflow sits and that you plan well ahead.”

Government schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS), the Bounce Back Loan Schemes (BBLS) and the Local Discretionary grants could provide necessary funds required to improve your cashflow during this period. Details on the different finance schemes can be found through our dedicated Coronavirus- Finance page.

October – last month of the scheme

  • In October, the government will cover 60% of salaries up to a cap of £1,875 for the hours the employee does not work.
  • Employers will be required to pay 20% of wages to make up 80% total up to a cap of £2,500.
  • Employers will continue to be required to pay ER NICs and pension contributions

What could this mean for your business?

With the job retention scheme ending in October and the financial pressures that some businesses might be under, there may come a time, to consider redundancy as a last resort to ensure the sustainability of the business. Employers can still make staff redundant while on furlough or afterwards. In addition, while you can continue to claim for furloughed employees who are serving a statutory or contractual notice period, grants cannot be used to substitute redundancy payments.

Information from our latest business survey of Greater Manchester based businesses published on 3 August, indicates that to date 5% of firms have made redundancies, whereas the proportion of firms that say they are considering making redundancies in future stands at 19%. 

With regards to several queries relating to the logistics of how redundancy could potentially work in terms of timing, notice and pay, Adam Pennington, Senior Associate Solicitor at Stephensons Solicitors LLP noted that:

 “Any change in the contract needs to be done with the agreement of the employee. You as a business could identify that there are less staff needed, because it may well be that you are waiting for business to pick up in the coming months. A consultation with those members of staff who you might need to work less hours or perhaps ask to do things that don’t necessarily sit within their job description or contract of employment will be crucial”. If an agreement along those lines can’t be reached there may well be a redundancy situation.” 

In addition, under new laws introduced on Thursday 30 July, furloughed employees who are made redundant, will be required to receive statutory redundancy pay based on their normal wages, rather than a reduced furlough rate. 

To support businesses and protect jobs, the Chancellor announced on 8 July, the introduction of a Job Retention Bonus, which will reward employers who successfully bring staff back from furlough and continuously employ them through to January 2021. Under the new policy, UK Employers will receive a one-off bonus of £1,000 for each furloughed employee who is still employed as of 31 January 2021. Payments will be made from February 2021. Full guidance will be published by the end of September.

For some businesses, their ongoing issues, could potentially lead to an insolvency scenario. According to Caroline Monk, the key message for these businesses is to:

“not close your eyes, and to take advice. The mention of insolvency suggests a one-way street to the end of the business, but it does not need to be that way. There is far more focus now on restructuring and rebuilding…and early intervention, following early advice will give you more options because you will be more in control of the process.”

For the latest information about the Coronavirus Job Retention Scheme for UK employers, visit our dedicated page. To make a claim for wages through the Coronavirus Job Retention Scheme, please visit the UK Government website here

 

More information is available on the UK Government’s Coronavirus Business Support website. For more personalised advice call us on: 0161 237 4128 or email us at: BGH@growthco.uk

 

The information provided is meant as a general guide only rather than advice or assurance. GC Business Growth Hub does not guarantee the accuracy or completeness of this information and professional guidance should be sought on all aspects of business planning and responses to the coronavirus. Use of this guide and toolkit are entirely at the risk of the user. Any hyperlinks from this document are to external resources not connected to the GC Business Growth Hub and The Growth Company is not responsible for the content within any hyperlinked site.

 

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