Furlough: How does the new furlough scheme work? | Personal Finance | Finance


The furlough scheme was introduced during the UK’s lockdown to help businesses retain employees at a time when many were losing income and unable to pay full wages. Chancellor Rishi Sunak unveiled the scheme in March, with employers able to claim a grant from the Government to cover the wages of a furloughed employee.

Originally, employers could claim 80 percent of the wages for a furloughed employee, subject to a cap of £2,500 a month.

Since July, the scheme has allowed for furloughed employees to work part-time, with furlough paying for the days not worked.

The amount the Government paid then dropped to 70 percent of a furloughed workers wages in September, and 60 percent in October with a cap of £1,875 per month.

However employees were not affected by these changes, as those on furlough would take-home the same pay, just divided up differently between their employer and the Government.

Now the scheme will change completely, with furlough due to end on October 31.

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Any hours an employee works will be paid for by their employer.

Then, for any hours they are not working, their employer will pay a third of their normal pay, and the Government will match this with another third.

For example, for someone who ordinarily earns £2,000 a month, this is how the scheme would work.

Working half of their normal hours would see them paid £1,000.

Under the scheme, they would then be paid an extra £333 from their employer, topped up with another £333 from the Government.

This would leave workers with 77 percent of their normal pay.

For businesses the Government is also offering grants should they have to close due to coronavirus restrictions.

So in the case of closure, employers are still required to pay workers’ national insurance and pension contributions.

They will receive a grant of up to £3,000 a month, compared with the £1,500 every three weeks closed businesses are currently eligible for.

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For employees to be eligible, they must have worked for their employer since at least September 23.

If an employer is claiming the scheme on a worker’s behalf, they cannot be made redundant or put on notice.

The UK government will also give businesses:

  • £1,000 for every furloughed employee kept on until at least the end of January
  • £1,500 for every out-of-work 16 to 24-year-old given a “high quality” six-month work placement
  • £2,000 for every under-25 apprentice taken on until the end of January, or £1,500 for over-25s

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