The 1st September marks the beginning of the end of the Government’s Coronavirus Job Retention Scheme (‘CJRS’ or ‘furlough scheme’). Since it was introduced in April, the Government has paid 80% of the wages of furloughed individuals and has repeatedly said that continuing the scheme beyond October would be unsustainable.
Some 9.6 million individuals have been furloughed since April, at a cost of approximately £35.4bn. Current estimates suggest that 12% of all workers are still on the furlough scheme. How many of those workers will be brought back into employment will have to be seen over the coming weeks as employers are compelled to make larger salary contributions.
So, what does the winding down of the furlough scheme mean for employers?
Although employers have had to pay employers’ pension and national insurance contributions since the beginning of August, as of 1 September they also need to make greater contributions to employee wages as follows:
CJRS pays Employer pays
1 September 70% (up to £2,187.50) 10% (up to £312.50)
1 October 60% (up to £1,875) 20% (up to £625)
31 October Scheme closes 100% from 1 November
What happens at the end of the furlough scheme in October?
Furloughed employees should return to work once the furlough scheme ends but if the business is not able to take back all its furloughed employees it will need to consider making redundancies. It is expected that as many as one in three businesses will need to make redundancies.
To make that process fair, businesses will need to consider what alternatives there might be to redundancies. Some employees now furloughed might be willing, for instance, to take a period of unpaid leave until trading conditions improve. Or they might accept alternative jobs or reduced hours. However, with Brexit also looming large at the end of the year, businesses will need to think carefully about how to restructure and reposition their future workforce to minimise disruption and ride-out this period of economic uncertainty.
What is the retention bonus?
Whilst the Government has resisted calls for the furlough scheme to be extended even for the hardest-hit sectors of hospitality and leisure, where an estimated quarter of a million jobs have already been lost, it has offered a £1,000 cash bonus for each worker that a company brings back from furlough and keeps in employment until January 2021. Whether this is incentive enough for companies to resist making redundancies will have to be seen, but given the scale of the impact on the economy from the coronavirus pandemic it seems unlikely that a £1,000 bonus will be enough to ward-off widescale job losses when the furlough scheme ends.
We are ready to assist and advise your business in these challenging times. Please get in touch with your usual 3CS contact.