July furlough changes – what you need to know

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Advice by Kate Palmer, HR Advice Director at Peninsula

The Coronavirus Job Retention Scheme (furlough scheme) was put in place to support employers who are not able to operate as normal due to the pandemic.

By designating employees as “furloughed”, employers have been able to recover a portion of employee wage costs up to a £2,500 cap. As confirmed by the Government Budget delivered on 3 March 2021, the scheme will continue to operate until the end of September 2021, with some adjustment to funding levels from July 2021.

Until the end of June 2021, the grant is 80% to a maximum of £2,500 per employee per month for hours unworked. Employees on full furlough (not working any hours at all), will get 80% of their wages per month unless their employer decides to top it up to 100%. Where an employee is on flexible furlough (working only some hours), they will be paid in full by their employer for the hours they work, and the grant will cover 80% of pay for their unworked hours only, subject to a cap which will be less than £2500.

As we move into 1 July 2021, the Government’s grant will reduce to 70% of furloughed employees’ wage costs for their unworked hours at a cap of £2,187.50. Pay for furloughed employees must remain at a minimum of 80% at a cap of £2,500, which means that employers must contribute 10% up to £312.50 from their own pocket. Further changes continue into August.

From 1 August 2021 until the scheme ends, the Government’s grant will reduce a final time to 60% of furloughed employees’ wages for their unworked hours at a cap of £1,875. With the 80% rule still intact, employers will need to contribute 20% to staff wages up to £625. Therefore, from July through to the end of September, employers will have to cover a portion of the employee’s actual wages and the national insurance and pension contributions.

The furlough scheme has been somewhat of a saving grace for many employers whilst lockdown restrictions have been in place. As these restrictions are slowly eased, based on coronavirus data, employers may find that they no longer need to make use of the scheme, or it may be that flexible furlough takes centre stage. Either way, employers will need to consider how they can accommodate the upcoming changes.

About Peninsula

Peninsula is one of the UK’s premier companies, started in 1983 by Salfordian Peter Done with headquarters on the fringes of Manchester city centre. The company offers HR, employment law and health & safety support services to small and fast-growing businesses across the country, as well as tax and payroll advice, employee assistance programmes, and HR and health & safety training. Since its beginnings in Salford, Peninsula has now expanded into the furthest corners of the globe, operating in Ireland, Australia, New Zealand and Canada.


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As coronavirus restrictions continue to ease and employees here return to work from furlough, a challenging dynamic is beginning to emerge.

Increasingly, there is a disconnect between those who continued to work and those who were furloughed. If left unaddressed, this could cause significant workplace disruption and productivity could be impacted. Often, those who continued to work, did so with reduced resources because colleagues were furloughed and arrangements with additional temporary support – like consultants and agencies – were concluded.

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With the announcement in the Chancellor’s Budget last month that the furlough scheme will be extended until the end of September 2021, it’s likely that some employees will have potentially been out of work for 18 months when they do finally return.

It’s important that both employers and HR alike do not underestimate the significance of being furloughed and the huge impact that this is likely to have had on those who have been affected. Some of the challenges furloughed workers may experience could include fear and anxiety, a feeling of being undervalued, imposter syndrome, a disconnect with their employer and teams, and even a lack of confidence in their abilities.


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