The Chancellor has announced changes to the Coronavirus Job Retention Scheme that will see the furlough scheme slowly tapered from July 1 and end officially in October, as the economy starts to reopen after Covid-19 lockdown.
Rishi Sunak detailed in a press briefing on Friday how employers will have to start sharing the cost of the scheme, with contributions introduced slowly over the next few months.
‘Significant’ costs will only be introduced from September.
From August, employers will have to pay National Insurance and pension contributions, then 10% of wages in September, rising to 20% of wages in October.
Workers will be allowed to return to work part-time from July, but companies will have to pay 100% of wages.
The move has been called a ‘positive and pragmatic step’ towards reopening the economy, by UKHospitality chief executive Kate Nicholls.
She says: “This is a positive and pragmatic step towards reopening the economy while recognising that this recovery will take time, particularly in hospitality. Giving businesses increased flexibility from the start of July is extremely welcome as hospitality looks to reopen its doors to the public.
“The move, which UKHospitality had been calling for, will allow more people back to work on a part-time basis and help venues ensure safety for customers and staff. Flexibility is going to be crucial if businesses are to open and be economically viable with social distancing measures in place.”
The Job Retention Scheme was originally intended to last until the end of July, and although the Chancellor announced plans to extend it to October earlier this month, he did not explain how employers would start contributing.
He said eight months of the scheme was a ‘generous and long period of time’.
Under the changes it means furloughed staff will continue to get 80% of pay until the end of October, but by then a fifth of their salary will have to be met by employers.
The scheme will close to new entrants on 30 June and employers will need to place new workers on the scheme by 10 June.
Some 8.4 million workers are having 80% of their salaries paid for by the government – up to £2,500 a month – under the scheme.