Furlough Scheme extended until September

Rishi Sunak has today announced, in the budget plan, that the furlough scheme has been extended to the end of September.

Chris Dobbs looks at the changes to furlough and what the extension means for employers and the self-employed.

Has furlough been extended?

Furlough was set to run until April this year, however it has now been extended until late September.

The furlough job retention scheme was first put in place in March 2020, with the aim to prevent mass job loss. The scheme pays 80% of employees' wages while they cannot work due to the pandemic; and has protected over 11 million jobs so far.

What was announced in the budget?

The Chancellor has set out a three-point plan which aims to rebuild the economy, 'fix' public finances and support people in the coming months.

Ahead of his statement to the Commons, Mr Sunak said: "There is now light at the end of the tunnel with a roadmap for reopening, it's only right that we continue to help business and individuals through the challenging months ahead."

Have there been changes to furlough?

For employees there have been no change, employees will continue to receive 80% of their salary for hours they haven't worked until the scheme ends.

As for employers, there have been changes; you can read about this below.

What does the furlough extension mean for employers?

With the idea of 're-building the economy' in mind, employers will be expected to pay a percentage towards the hours that their staff don't work; starting July. The rate will begin at 10% and increase to 20% during August and September, as the economy starts to reopen again.

The scheme is being 'tapered off' in such a way with the aim to prevent employers suddenly being thrown in the deep-end of employment salaries.

These employer contributions will presumably end after September, but this is yet to be confirmed. It is worth noting that the scheme has been extended 3 times already.

What does the furlough extension mean for the self employed?

Rishi Sunak announced further support for self-employed workers in the coming months. 600,000 more self-employed people will now be eligible for grants.

From April, a fourth grant from the Self-Employed Income Support Scheme will be made available to claim for those eligible. This will be worth 80% of three months' average trading profits up to £7500.

The fifth grant covers the period May to September 2021. The Chancellor announced that this will be a reduced grant for self-employed individuals whose fall in turnover was less than 30% in the previous financial year. The grant is worth:

• 80% of 3 months’ average trading profits, capped at £7,500, for those with a turnover reduction of 30% or more
• 30% of 3 months’ average trading profits, capped at £2,850, for those with a turnover reduction of less than 30%

The Chancellor had previously been criticised due to newly self-employed people not being supported by the scheme.

What else was announced in the Budget Plan?

• The national living wage was confirmed to be £8.91 from April 1st; which is, in effect, the minimum wage of those aged 23 or over.
• The weekly £20 universal credit uplift has been extended until September
• Direct cash grants to come to an end in March for businesses
• Restart grant to be introduced in April to help businesses reopen again
• Stamp duty holiday has been extended until the end of June. You can read about that here.

What has the reaction been to the extension of furlough?

Labour's shadow chief secretary to the Treasury, Bridget Phillipson, said that the changes to the support schemes "could have been made months ago", criticising Mr Sunak.

Rain Newton-Smith, of The Confederation of British Industry (CBI), showed support for the changes; saying that it would keep "millions more in work and give businesses the chance to catch their breath as we carefully exit lockdown". The CBI speaks for an estimated 190,000 businesses.

Chris Wootton, chief financial officer at Sports Direct said "What we really want is structural reform. This is just kicking the can down the road."

A specialist employment solicitors' view

Chris Dobbs stated “Rishi Sunak has just confirmed the worst kept secret regarding the extension of the furlough scheme and very few of his announcements as far as they affect employees and employers will come as a surprise. It remains to be seen whether the furlough scheme will protect jobs in the long run but the Chancellor is clearly hoping that large investment now will pay dividends once lockdown ends.”

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