Furlough changes – 1 July 2021

If you cannot maintain your workforce because your operations have been affected by coronavirus ( Covid 19)

You can furlough employees and apply for a grant to cover a portion of their usual monthly wage costs where you record them as being on furlough. 

For periods starting on or after 1 May 2021, you can claim furlough or employees who were employed on 2 March 2021, as long as you have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021, notifying a payment of earnings for that employee. You do not need to have previously claimed for an employee before the 2 March 2021 to claim for periods starting on or after 1 May 2021.

Position up to 30 June 2021

For periods ending on or before 30 June 2021 you can claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month.

Position from 1st July 2021

From 1 July 2021, the level of the CJRS furlough grant will be reduced and you the employer will be asked to contribute towards the cost of your furloughed employees wages. To be eligible for the grant you must continue to pay your furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they spend on furlough.

 

The table below shows the level of government contribution available in the coming months, the required employer contribution and the amount that the employee receives per month where the employee is furloughed 100% of the time.

 

Wage caps are proportional to the hours not worked.

furlough rates July 2021

Just as a reminder – these are the more general rules of Furlough

 

  • Employers can furlough employees for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked.
  • You will need to pay for Employer National Insurance contributions and pension costs. 
  • The rate of furlough will be based on the employees’ wages at March 2020 or their first start date, whichever is soonest.
  • Employers should discuss this process with their team and make any changes to the employment contract by agreement.
  • When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
  • To be eligible for the grant, employers must have confirmed to their employee (or reached collective agreement with a trade union) in a written agreement, that they have been furloughed.
  • keep the written record of the agreement for 5 years
  • keep records of how many hours your employees work and the number of hours they are furloughed (such as, not working)
  • You do not need to place all your employees on furlough.

 

When your employees are on furlough

During hours in which you record your employee as being on furlough, you cannot ask them to do any work for you that:

  • makes money for your organisation or any organisation linked or associated with your organisation
  • provides services for your organisation or any organisation linked or associated with your organisation

Your employee can:

  • take part in training
  • volunteer for another employer or organisation
  • work for another employer (if contractually allowed)

Holiday Pay

Furloughed employees continue to accrue leave as per their employment contracts.

You can only place employees on furlough if coronavirus is affecting your operations.

You should not place employees on furlough just because they are going to be on paid leave.

 The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Employees can take holiday whilst on furlough. If they are flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. But, you should not put your employees on furlough for a period just because they are on holiday for that period.

This means that employees should only be placed on furlough because your operations have been affected by coronavirus and not just because they are on paid leave. This applies equally during any peak holiday period.

Working Time Regulations (WTR) require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the last 52 working weeks (12 weeks in Northern Ireland). Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.

Employers will be obliged to pay employees who are on holiday additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need and the correct notice is given. This applies for both the furlough period and the recovery period.

If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.

Comment from our Directors

We have recently received a tranche of enquiries from HMRC in to clients’ ongoing Furloughed employees and subsequent claims made, so please review ‘robustly’ your positions in respect of employees you still have on Furlough.

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THIS ARTICLE WAS WRITTEN BY

The England and Company Team

The England and Company Team

Our experts include: Chartered Certified Accountants, Chartered Tax Advisors and Registered Auditors.

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