NEWS

August to see furlough scheme employers pay 20% of wages

Published on: 29th May 2020

Employers will also be expected to pay towards each worker’s National Insurance and pension contributions. 

Chancellor Rishi Sunak is expected to announce amendments to the UK furlough scheme which will see a rise in the cost to participating employers. Under the revised scheme, employers will pay 20% towards furloughed workers’ wages, in addition to their National Insurance and pension contributions.

The furlough scheme has been of vital importance to tens of thousands of employers during the coronavirus pandemic, as companies found themselves facing sudden and significant drops in income. Some 8.4m people are currently receiving payments through the scheme, while a further 2m are being supported by a separate self-employed scheme. It was announced in April that the scheme – which sees furloughed employees receive 80% of their wages, up to £2,500 – would be extended through to the end of October.

Although widely welcomed, the furlough scheme has made a major dent in government finances, coming in at an estimated £80b in total, according to the Office for Budget Responsibility. However, the announcement regarding employer-payments has triggered consternation among many, with fears the move could lead to redundancies as companies choose to lay off workers rather than contribute. A survey conducted by the Institute of Directors found that a quarter of employers using the job retention scheme said they would not be able to afford to make any contribution at all towards furloughed workers’ wages, even though half felt able to pay a 20% contribution from August.

Meanwhile, the government has yet to unveil an extension to the help for the self-employed, whose support is set to run out this weekend. A cross-party group of 114 MPs is urgently calling on the Chancellor to extend the provision.

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