When announcing the last budget, the Government said they were expecting the economy to have sufficiently recovered by the end of September and as a result are ending the furlough scheme on 30th of this month.
The final month of the scheme allows claims of up to 60% of the employee’s usual pay with a cap at £1,875 and must be submitted by 14th October (you have to 28th October to make any adjustments).
Despite assumptions of the economy returning to normal, the end of furlough may lead to many businesses assessing staffing levels going forward. As a result, many may be considering making the tough decision about which employees to make redundant.
Is the furlough scheme still being used?
As at 30th June 2021, there were 540,000 employers with 1.9 million staff on furlough in comparison to the previous month which saw 2.4 million employees making use of it.
It is estimated that these figures will have drastically reduced from 1st July 2021 due to contributions being required by the employer.
Government contributions only made up 70% of the furlough cost in July which then reduced to 60% in August and September, but employers had to make up the difference to 80% of the usual salary.
Since the start of the furlough scheme a total of 11.6 million jobs were put on furlough for at least part of the duration of the scheme.
Furlough fraud has been a concern since the introduction of the scheme, and it is estimated that over 90,000 calls were made to HMRC up to December 2020 reporting such behaviour.
Measures were put in place to increase transparency and to deter fraudulent claims. Firstly, employers’ furlough claim information, for claim periods starting on or after 1st December 2020, was made public and published by HMRC.
The Government has announced that funding will be made available to a taskforce in a bid to re-coup some of the funds claimed fraudulently.
What about the other schemes announced?
The Job Support Scheme (the scheme announced prior to the original furlough end date as a replacement for the furlough scheme) was postponed back in November 2020 because of the extension of the scheme at that time. The Job Support Scheme and its extension for closed businesses remain postponed. There has been no further announcement at all.
The Job Retention Scheme Bonus was based on employers keeping on staff continuously to the end of January 2021, at which point they would receive a £1,000 bonus for doing so.
There has been no further announcement on this scheme either despite the Government stating in November 2020 that a new retention incentive would be deployed at another time.
It looks likely these two schemes will not be reintroduced and were measures put in place at the time which are no longer appropriate.
The end is near
With only a few weeks left of the furlough scheme (which is unlikely to return in our lifetime) It is important to be aware of the dates for making claims for payments:
- Claims for furlough days in August 2021 must be made by 14th September 2021.
- Claims for furlough days in September 2021 must be made by 14th October 2021 and any amendments must be made by 28th October 2021.
From a scheme that was first announced in March 2020 to be only a temporary measure, lasting for three months, it will have been in place for around 18 months by the time it ends.
Dealing with redundancies correctly
As we mentioned at the beginning of this blog, with the end of the furlough may come an increase in redundancies.
It can be a difficult time for employers as well as employees and therefore using an experienced firm of accountants and seeking payroll help can help reduce stress at such a time.
Remember that there are key steps that need to be followed as far as employment law is concerned. It is also important to treat any payments on termination of employment correctly for tax and national insurance purposes.
In genuine redundancy situations the first £30,000 paid on termination of employment is tax free but many employers can get this wrong.
The excess is subject to income tax and employers’ national insurance. We have an experienced payroll department who can assist you with the process to ensure that any redundancies are dealt with correctly.
If you need any additional information on anything you have read or discuss how the end of furlough may impact your business, call us on 01482 888820.