The furlough scheme is changing on 1 August - here’s what you need to know

Tuesday, 28th July 2020, 12:13 pm
Updated Tuesday, 28th July 2020, 12:13 pm
Changes to the government’s furlough scheme will begin this weekend (1 August), as employers will have to start making contributions for all furloughed employees (Photo: Shutterstock)

Changes to the government’s furlough scheme will begin this weekend (1 August), as employers will have to start making contributions for all furloughed employees.

The furlough scheme has seen the government pay the wages of millions of workers throughout the coronavirus pandemic, but the first set of changes are soon to come into effect.

Here’s what you need to know.

Changes from 1 August

From Saturday 1 August, firms will be asked to start paying National Insurance and pension contributions for the first time since April. However, the Government will continue to pay 80 per cent of wages up to a cap of £2,500.

For employees, your pay won't change, but firms will be asked to pay around five per cent per person.

Later changes

The furlough scheme will come to an end on 31 October, but from 1 September, the scheme will change again. The Government's contributions will fall to 70 per cent, up to a cap of £2,190.

Employers will have to pay National Insurance, pension contributions and 10 per cent of wages, to take the total to 80 per cent (up to a cap of £2,500).

In October, this will then fall again. The Government’s contributions will fall to 60 per cent, up to a cap of £1,875. Employers will then have to pay National Insurance contributions, pension contributions and 20 per cent of wages in order to take the total to 80 per cent, or £2,500.

Chancellor’s bonus scheme

Under a new back to work bonus, the Government has said it will pay employers £1,000 for every member of staff brought back from furlough.

During his coronavirus mini-budget announcement earlier in July, Chancellor Rishi Sunak said that companies which keep employees on until January 2021 would receive a bonus of £1,000. However, this bonus is just for employers - there will not be a cash bonus for the people on furlough themselves.

In order for companies to qualify, employees must be paid a wage of at least £520 on average in each month from November to January.

This is the equivalent of the lower earnings limit in National Insurance.