Change to Furlough Rules July 2021
Back in March earlier this year, we published a blog setting out what the Spring Budget 2021 means for your business. In that blog we briefly discussed that Rishi Sunak had extended the furlough scheme until September 2021.
However changes are now being made to the furlough scheme as an estimated four million people continue remaining dependent on it.
What are the changes to Furlough in July 2021?
The scheme was originally announced by Chancellor Rishi Sunak at the start of the pandemic in March 2020 and since then the government has paid 80% of wages for hours not worked, up to a cap of £2500.00 per month.
As of the 1st July 2021 this will all change as companies will be required to contribute to the monthly payroll for its employees who are on the furlough scheme.
Similar to the reduction in support in the penultimate months prior to the scheme being extended last year, from the 1st July 2021 the coronavirus job retention scheme will cover 70% of wages up to a maximum of £2,187.50.
How will the furlough changes affect employees?
These changes do not mean that those on furlough will see a reduction in their pay as the government is still keeping the 80% rule in force.
However it does mean that companies will instead have to top up the remaining 10% (up to £312.50) of the wages for its employees to receive the support.
Are there any further changes to the Furlough Scheme?
Unfortunately for companies who are struggling with cash flow, the government contribution is set to drop again in August to 60% and contributions will then subsequently be rising to 20%. The 60% – 20% rule will continue into September when the scheme is currently due to end.
Employers must still pay national insurance and pension contributions and are able to top-up salaries to 100% with their own funds, although the top up to 100% is not mandatory.
Contact Insolvency Practitioners if your business is struggling
At the height of the furlough scheme over nine million people were dependent on the support and due to a mixture of some industries picking back up, others still stuck with lockdown easing and a vast majority unfortunately being left with no choice but to close their companies, these figures have now more than halved.
If your business is struggling or you feel these changes may severely affect your cashflow then it is always useful to speak with a licensed firm of insolvency practitioners like ourselves here at Keywood Group at an early stage.
Feel free to contact us today on 0121 201 0399 for a free confidential no obligation consultation.