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Businesses urged to prepare for future furlough changes

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Business should be prepared for changes to the furlough scheme in the coming weeks, according to London-based accountancy firm Grunberg & Co.

HM Revenue & Customs (HMRC) has recently published a series of updates to its guidance on the Coronavirus Job Retention Scheme (CJRS), more commonly known as the ‘furlough scheme’.

The updates cover the changes to the scheme, as it is extended from 1 May 2021 to 30 September 2021.

The guidance confirms that new employees who have not previously been eligible for furlough can be furloughed for the first time from 1 May 2021 onwards, if they were included in a Full Payment Submission to HMRC by 2 March 2021.

Nimesh Patel, Tax Partner at Grunberg & Co, said: “The furlough scheme has provided a lifeline to many employers during the pandemic, but in the months ahead a number of changes will mean that the cost of employment rises once again.

“Although many sectors are now re-opening, many companies face a challenging time ahead, especially as cash flow remains constrained. The withdrawal of vital Government support could put the success of some businesses at risk, unless they take action now.”

As with the existing scheme, furloughed employees will continue to receive 80 per cent of their usual wages capped at £2,500 a month, or equivalent weekly or daily figures, for usual hours not worked under the extended scheme.

The CJRS grants will continue to cover the full 80 per cent paid to employees in May and June, while employers must cover the costs of the associated Employer National Insurance and workplace pension contributions.

However, employers will need to make a 10 per cent contribution in July and a 20 per cent contribution in August and September, as the Government reduces the amount of financial support on offer.

The calculation of usual wages is based on the last pay period before the employee became eligible for furlough. Businesses should also be aware that these dates will vary, depending on whether the employee was reported to HMRC on or before 19 March 2020, 30 October 2020, or 2 March 2021.

“The calculation of furlough payments remains complex and can be challenging, especially as many businesses are already busy managing the impact of COVID-19,” said Nimesh.

“These latest amendments to the scheme make it all the more important for employers to seek advice, not only to remain compliant with these new requirements but also to manage the administrative and financial burden that these new rules may have on a business.”

The Government’s latest guidance also clarifies and changes several technical points relating to the calculation of furlough pay in various circumstances.

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Businesses urged to prepare for future furlough changes

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