UK furlough rules to change in July 2021: What it means for you and business

Alfie Brown

What employees and employers need to know about the upcoming changes to the scheme.

Furlough rules in the UK are set to change come July 2021, as confirmed by the Government Budget back in March.

From July through to the end of September, employers will have to cover a portion of the employee’s wages, national insurance and pension contributions. The Coronavirus Job Retention Scheme, as it is called, has enabled struggling companies to recover a portion of employee wage costs up to a £2,500 cap.

The Government has extended the scheme until the end of September 2021, but some adjustments will come in force on July 1 and August 1, 2021.

Until the end of June 2021, the grant is 80% to a maximum of £2,500 per employee per month for hours unworked.

Employees on full furlough (not working any hours at all), will get 80% of their wages per month unless their employer decides to top it up to 100%. Where an employee is on flexible furlough (working only some hours), they will be paid in full by their employer for the hours they work, and the grant will cover 80% of pay for their unworked hours only, subject to a cap which will be less than £2500.

As we move into 1 July 2021, the Government’s grant will reduce to 70% of furloughed employees’ wage costs for their unworked hours at a cap of £2,187.50.

Pay for furloughed employees must remain at a minimum of 80% at a cap of £2,500, which means that employers must contribute 10% up to £312.50 from their own pocket. Further changes continue into August.

From 1 August 2021 until the scheme ends, the Government’s grant will reduce a final time to 60% of furloughed employees’ wages for their unworked hours at a cap of £1,875. With the 80% rule still intact, employers will need to contribute 20% to staff wages up to £625. Therefore, from July through to the end of September, employers will have to cover a portion of the employee’s actual wages and the national insurance and pension contributions.

The furlough scheme has been somewhat of a saving grace for many employers whilst lockdown restrictions have been in place.

As these restrictions are slowly eased, based on coronavirus data, employers may find that they no longer need to make use of the scheme, or it may be that flexible furlough takes centre stage.

Either way, employers will need to consider how they can accommodate the upcoming changes.