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06/08/2021

Employer costs increase as furlough scheme winds down

Employer contributions towards furloughed workers’ wages have increased again, as the furlough scheme prepares to close for good on 30 September 2021.

Officially introduced at the start of the pandemic in March 2020, the scheme has supported around 11.6 million jobs in the UK to date at a cost of £66 billion.

For most of that time, the scheme has paid 80% of the wages of people who couldn’t work, or whose employers could no longer afford them, up to £2,500 a month.

While that £2,500 cap remains in place until the scheme closes, employers’ costs started to increase last month.

From 1 July 2021, the Government’s contribution reduced from 80% to 70%, while employers were asked to pay 10% of furloughed workers’ salaries, ensuring workers will not notice the difference.

For August and September 2021, employers will pay 20% as the Government contributes 60%.

The Government hopes that by making it more expensive for employers to furlough workers, they will opt to take workers back full-time if they can afford to do so.

Throughout the pandemic, employers using the scheme already have to pay workplace pension and National Insurance contributions on their workers’ behalf.

The Institute for Fiscal Studies said the bill for employers keeping a member of staff on furlough rose from £155 a month in June, to £322 in July and £489 in August and September.

For further information on managing costs, please contact James Alesbury on 023 8046 1222.

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