Furlough: Coronavirus Job Retention Scheme extended to September

As the chancellor confirms the UK furlough scheme will be extended until September 2021, we explain what this means for you.

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Chancellor Rishi Sunak has announced a much-anticipated furlough extension. But when will furlough end now, and what do the changes mean for us all? Let’s take a look. 

What is the Coronavirus Job Retention Scheme?

Back in March 2020, the UK government announced the Coronavirus Job Retention Scheme.

  • Employers can ask HMRC to cover up to 80% of wages for employees who they’ve kept on the payroll, but who can’t work due to Covid-19 restrictions. 
  • It covers commercial and nonprofit businesses. 
  • If you’re still on the payroll but you’re not working right now, you’re ‘furloughed’. 

The Scheme allows employers to retain employees rather than letting them go, so it helps to reduce unemployment during the pandemic. 

When does furlough end now?

Originally, furlough was due to end back in May 2020. However, as the pandemic continued, the UK government recognised the need to keep supporting businesses affected by restrictions. 

The upshot? Furlough will now run until the end of September 2021.

There’s no limit on which employers can use it, but it’s most beneficial to businesses that can’t open again until summer at the earliest, like nightclubs. It also helps sectors working under heavy restrictions right now, such as:

Right now, it looks unlikely that the chancellor will extend furlough beyond this date. However, it could depend on how well we control the spread of Covid-19 once the economy reopens. 

Why is furlough being extended?

It’s a good question. If we’re expecting the country to reopen fully in mid-June, why extend furlough? 

Well, it’s happening for a few reasons: 

  • The scheme helps to minimise job losses as shops, leisure and hospitality reopen in the coming months.
  • Some venues can’t reopen at all until at least mid-June. They need time (and financial support) to bring employees back flexibly and safely.
  • It could be some months yet before we’re travelling freely again, so the travel sector needs support. 

Remember, it will take months for businesses to recover fully from the impact of Covid-19 and lockdown restrictions. Furlough gives everyone a little breathing space to get moving again. 

How will the extended furlough scheme work?

Basically, workers will still receive 80% of their wages until the end of September if they’re furloughed. However, we’ll see some changes to what contributions employers must make if they use the Job Retention Scheme.

  • Employers must contribute at least 10% of employees’ wages if they don’t work in July. 
  • The contribution increases to 20% for the staff who don’t work in August and September. 

The changes reflect the fact the economy’s reopening, so more people can safely return to work again than before. 

What other support is available?

The chancellor has announced a host of new measures to support the economy. Here’s a brief summary of the highlights:

  • A Restart Grant for small businesses
  • £20-a-week universal credit top-ups lasting another six months
  • £408 million to help venues like museums and galleries open safely again in England 
  • A rise in the minimum wage to £8.91 per hour from April 2021 
  • A fourth SEISS grant that will include support for workers who missed out before 

And, remember, you can still apply for benefits if you’re eligible and struggling to pay your bills. Check with your local Job Centre or HMRC to go over your eligibility.

Takeaway

The furlough extension is hugely positive news for businesses worrying about how they’ll reopen after restrictions ease. However, there’s no guarantee that the Job Retention Scheme will prevent redundancies and job losses.

So, if you’re worried at all about your prospects of returning to work, or you’re struggling with money worries, remember that organisations like Citizens Advice are there to help. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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