Some big changes to furlough rules are coming from this week

The furlough scheme helped cover the wages of 8.4 million people in the UK, but the rules are set to change this week.

The government’s Coronavirus Job Retention Scheme has been a huge part of the coronavirus pandemic, and most of us will at least know some people currently on furlough.

It’s estimated that furlough has now paid for 8.4 million people’s wages, costing the government £15 billion. 

Chancellor Rishi Sunak has announced that the scheme – set to end on October 31st – will have a series of changes to wind it down.

From Wednesday, July 1st, employers can bring furloughed employees back to work for any amount of time and on any shift pattern, with the retention scheme grant paying for the hours not worked. 

Then from August 1st, companies will be expected to pay employer national insurance and pension contributions and the level of the furlough grant will be reduced each month.

In September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough.

Companies will have to pay NIC and pension contributions to top up the wages of those on furlough to ensure they are still receiving 80% of their wage. This will still be capped at £2,500 for the time they are furloughed. 

In October, the government will pay 60% of wages, capped at £1,875 for the hours the employee is on furlough.

And again, employers will be expected to make their employees wages up to 80%, to a cap of £2,500, and pay NIC and pension contributions. 

Despite the furlough scheme proving many people with a huge support system, many people have expressed concerns regarding the impending recession and what this means for unemployment.

The Prime Minister has reported that the government will spend on infrastructure to ‘build our way back to health’.

“If Covid was a lightning flash, we’re about to have the thunderclap of the economic consequences,” he said.

“We’re going to make sure that we have plans to help people whose old jobs are not there any more to get the opportunities they need.”

Spending on infrastructure could give some immediate ‘payback’ by increasing the number of people in work and the ‘amount of demand’ in the economy in the short term, according to the director of the Institute for Fiscal Studies, Paul Johnson. 

Johnson warned that the UK could return to ‘levels of unemployment we haven’t actually seen for decades’ if money is spent by the government in the wrong way, or done too quickly, adding it could result in ‘low-quality infrastructure projects which don’t pay for themselves’.

The Labour Party has commissioned an analysis of the potential unemployment levels, which could tip past the highest rate of 3.3 million that was seen under Margaret Thatcher’s government.  

Many economists have warned that the full effects coronavirus will have on employment won’t be felt until the wage support scheme completely ends. 

The Mayor of London has called upon the government to extend ‘the Coronavirus Job Retention Scheme beyond the end of lockdown’, he Tweeted. 

Adding: “or else risk unemployment, poverty and homelessness across the capital. This is urgent. The Govt must act.”