Furlough changes from August 1 explained with employers starting to pay wages


FURLOUGH won’t be extended beyond October the government has confirmed this week, but there are big changes to the scheme coming into force from next month.

Over 9.3million workers have been placed on the scheme, which has seen the government cover 80 per cent of wages up to £2,500 a month, since its launch in March.

Employers will have to start contributing towards the wages of furloughed workers from next month

The initiative closed to new workers in June but those still on it can continue to get government funding until October 31.

But in order to get this support from August, your employer will have to start contributing too.

This has lead to fears from many experts, including MoneySavingExpert.com founder Martin Lewis, that employers will start making hundreds of thousands of people redundant if they can’t afford payments.

The government hopes to combat this with the launch this week of a new £1,000-bonus for employers who take back furloughed workers and employ them continuously through to January 31, 2021.

Each worker must be paid at least £520 per month on average, and bosses will get the cash bonus from February 2021.

The announcement comes as furlough has already been tweaked this month to allow employees to start working part-time for bosses.

Until now, you couldn’t work for your employer while furloughed – and you had to be on furlough for at least three weeks at a time if you were reemployed inbetween.

But further changes are also afoot; here’s what you need to know.

Changes from August

Businesses will start picking up the furlough bill in August when they have to pay national insurance (NI) and pension contributions. 

This represents about 5 per cent of employment costs for businesses. 

The government will continue to pay 80 per cent of staff wages up to the £2,500 a month cap.

Changes from September

From September, the government’s contribution will fall to 70 per cent of wages up to a cap of £2,187.50 a month.

This means employers will have to pay 10 per cent of salaries to make up 80 per cent of wages in total up to a cap of £2,500.

Employers will also need to continue to pay NI and pension contributions. 

For the average claim, this represents 14 per cent of the employment costs.

Changes from October

In October, the government’s contribution will fall again to 60 per cent of wages up to a cap of £1,875 a month.

This will see businesses have to pay 20 per cent of salaries to make up 80 per cent in total up to a cap of £2,500.

In addition, employers will need to continue to make NI and pension contributions. 

It means employers footing the bill for 23 per cent of employment costs.

The scheme will then end on October 31.

Did you miss our previous article…