STARTING August 1 the UK Government will start winding down the Coronavirus Job Retention (furlough) scheme.
This means employers will have to contribute a higher share of the cost of keeping their staff furloughed.
It’s protected millions of jobs during the Covid-19 pandemic but there are fears jobs will be lost when it is completely phased out at the end of September.
How is furlough changing?
When furlough was introduced in the spring of 2020, the Government initially paid 80% of the wages of people who couldn’t work or whose employer couldn’t afford to pay them up to £2500 per month.
READ MORE: When does furlough end 2021: 590k firms come off support scheme
But that changed in July, 2021, when employers were required to pay staff 10% of their salaries while the Government dropped its contribution to 70%.
This will shift on August 1, when the Government will contribute only 60% of employees’ wages while employers will be expected to pay 20%.
The £2500 limit will not change.
The scheme will end altogether on September 30.
What does this mean for me?
Workers should see no change to their pay before furlough ends as government and employer contributions should still equal 80% of their wage.
This means businesses will have to decide whether to take any furloughed workers back into employment or make them redundant.
HMRC have released a video to help employers understand the changes coming into effect for the furlough scheme, which can be viewed here: www.gov.uk/guidance/help-and-support-if-your-business-is-affected-by-coronavirus-covid-19#history
Will ending furlough lead to job losses?
The most recent figures, from June, show that around 1.9 million people were on furlough – down from 5.1m in January. That means about 28% of employers had staff on furlough.
There is particular concern amongst workers in industries still reeling from the pandemic, such as international travel which may see some people in these sectors lose their jobs.
This has led the SNP to label the UK Government’s decision to end furlough – which has been delayed four times – “premature” as there are still companies who rely on the scheme in order to keep workers in employment.
READ MORE: Apologise to Scots, SNP MP tells Rishi Sunak on visit to Scotland
Some forecasters, including those at the Bank of England and the Government's spending watchdog, the Office for Budget Responsibility, expect a small rise in unemployment after furlough ends.
Unions have also warned of unemployment in the autumn if the scheme is wound down before businesses have fully recovered from Covid lockdowns.
The TUC published an analysis that suggested only one in eight of the 790,000 UK jobs in manufacturing retail, hospitality and the arts during the pandemic have been recovered.
This has caused concern that the effect of ending the furlough scheme will not be felt equally by workers in all industries.
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