Guide: How does the part time furlough scheme work? And what other tweaks did chancellor make?

Time 1 year ago

The chancellor Rishi Sunak has tweaked the furlough scheme to allow employees back part time from July 1.

But how does the new scheme work and what will employees be allowed to do and employers have to pay?

Here we take a look at the scheme in more detail.

I want to get staff back from furlough part time – will that be allowed?

In a word, yes. The details on how many hours an employee can work remain unclear, but the government said it is looking for maximum flexibility.

From July 1, employers ‘will be able to agree any working arrangements with previously furloughed employees’, the Treasury said.

Officials added that companies can be flexible with their definition of ‘part-time’ as long as a full-time employee has not returned to normal hours.

Employers should pay the staff normally for the hours they are working – and then claim the rest from the government. This effectively means employees will be paid 100 per cent of their wages for the hours they work – and 80 per cent of their usual wages for the time the remaining time they are on furlough.

Sunak has previously said furloughed workers can take jobs elsewhere while on the scheme, but anyone looking to bring workers back will need to ensure organisations are ‘Covid Secure’ under new guidelines drawn up by the Department for Business, Energy and Industrial Strategy.

This video, tweeted by Sunak, sums up the changes

How much will employees get under the furlough scheme?

The same as they do now. Sunak said workers will continue to receive 80 per cent of their pay – up to £2,500 a month – until the end of October.

The chancellor also said they will be allowed to return to work part-time from July without risk of losing out financially, rather than August as initially suggested. Officials added this was due to businesses asking for greater flexibility to get staff back to work.

How much will employers have to pay under the furlough scheme?

Businesses will also have to start paying National Insurance and tax contributions for staff in August – which equates to around five per cent. 

The Government will cover 70 per cent of wages up to £2,190 in September, with employers to pay National Insurance and pension contributions and 10 per cent of wages, representing 14 per cent of the gross employment costs.

The following month, the Treasury will pick up 60 per cent of wages up to a cap of £1,875, with employers paying tax contributions and 20 per cent of wages, representing 23 per cent of the gross employment costs.

It added that only 40 per cent of businesses had claimed the pension contributions since the scheme was launched.

How long will the furlough scheme run?

It won’t go past the end of October. Officials were keen to stress there are other measures in place and support for businesses and individuals, but the scheme will end on Halloween.

Chancellor Rishi Sunak told the Commons earlier this month: ‘We will keep everything under review, but my expectation is by then (November) the scheme should end. We’ve stretched and strained to be as generous as possible to businesses and workers, which is why we have made the decision that we’ve made today.’

How much will the furlough scheme cost the taxpayer?

The total bill for it is expected to be around £80bn – £15bn has so far been paid out – with the amounts falling as more parts of the economy reopens and staff can return to work.

The bigger cost to the economy would be these millions of people hitting the dole queue. There are currently 8.4m workers on the furlough scheme with one million businesses taking advantage of the subsidy.

Will this lead to mass redundancies?

The car retailing businesses has clearly changed and is likely to change forever. There will sadly be many employees on furlough who lost their jobs back in March, but don’t know it yet.

With car dealers getting back to business on Monday, only time will tell what level of demand is out there for new and used cars. However, with a dark recession looming, that demand could soon drop off leading to reduced car sales and less of a need to get furloughed staff back to work.

The next few months will be absolutely critical to the car industry and those employees still not back at work.

Unions are warning once the support ends, companies will start sacking staff as the money dries up. 

The independent Office for Budget Responsibility (OBR) has predicted unemployment will peak at 10 per cent this summer, before falling back to 7.5 per cent by the end of the year, based on a three-month lockdown scenario. Officials are expected to present revised figures next week.

What cash is available to self-employed workers?

Freelancers will be able to claim up to £6,570 in August as a second, and final, grant is offered to those who have lost income from the coronavirus lockdown.

Each self-employed worker can apply for the grant of 70 per cent of their average monthly trading profits, up to a cap of £6,570. 

Including the first grant in May, the maximum amount self-employed workers can receive is £14,070 each.

There had been calls for freelancers to be paid the same as employees who are furloughed, but, this has been rejected.

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The Chancellor had faced calls, including from a cross-party group of 113 MPs, to extend the scheme for self-employed workers, which has so far seen 2.3m claims worth £6.8bn.

To combat fraud, employees will be able to report any concerns to HM Revenue and Customs.

Furloughed staff will be allowed back part time from July 1 as employers asked to help cover percentage of wages

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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