Employers to be asked to pay NI and pension contributions from August

By Nikkie Thatcher

- Last updated on GMT

Government announcement: Chancellor Rishi Sunak has outlined further details of the furlough scheme extension
Government announcement: Chancellor Rishi Sunak has outlined further details of the furlough scheme extension

Related tags Coronavirus Chancellor

Employers will have to start making payments towards the furlough scheme, starting with national insurance (NI) and pension contributions from August, the Chancellor Rishi Sunak has announced today (29 May).

Following this, from September, employers will be asked to pay 10% of furlough wages with taxpayers contributing 70% and, from October, employers are to pay 20%, with taxpayers covering 60%.

The Coronavirus Job Retention Scheme (CJRS), which is commonly known as furlough, was first announced on Friday 20 March and currently means employers can claim​​​ for payments that cover 80% of furloughed employees’ wages, up to a maximum of £2,500 per month. Employers also have the option to top up staff payments.

Sunak said: “More than 1m jobs and more than 1m businesses are protected by furlough. The furlough scheme will remain open all the way until October.

“We will ask employers to start contributing as we also introduce flexible furloughing and employees will see no change to their level of support.

“As promised, I can provide more details today (29 May). I believe it is right, in the final phase of this eight-month scheme, to ask employers to contribute alongside the taxpayer, towards the wages of their staff.

“But I understand too that businesses and employers have been through an incredibly difficult time so I have decided to ask employers to pay only a modest contribution, introduced slowly, over the coming months.”

Employment costs

He added: “In June and July, the scheme will continue as before with no employer contribution at all. In August, the taxpayer contribution to people’s wages will stay at 80%. Employers will only be asked to pay NI and employer pension contributions that, for the average claim, account for just 5% of total employment costs.

“By September, employers will have had the opportunity to make any necessary changes to their workplaces and business practices. Only then, in the final two months of this eight-month scheme, will we ask employers to start paying towards people’s wages.

“In September, taxpayers will pay 70% of the furlough grant, with employers contributing 10%. In October, taxpayers will pay 60% and employers will contribute 20%.”

He went on to outline how the CJRS will close.

Sunak then added: “Employers wanting to place new employees on the [current] scheme will need to do this by 10 June to allow them time to complete the minimum furlough period before then.”

He highlighted how the flexible furlough scheme will work and that it will be open a month earlier than originally planned.

Flexibility to decide

The Chancellor said: “The biggest request I’ve heard from businesses, large and small, right across our country, is to have the flexibility to decide what is right for them.

“So, to protect jobs and help businesses decide how quickly to bring their workforce back, we are introducing a new, more flexible furlough. This is a critical part of our plan to kick start the economy. The financial security of the furlough scheme has been a relief for many but, at the same time, people want to work.

“No one wants to be at home, on furlough. No one wants to feel unable to contribute so HMRC and the Treasury have worked hard to put the flexible furlough in place, not from 1 August as planned, but from 1 July – one month early.

“From 1 July, employers will have the maximum possible flexibility to decide the right arrangements for them, and their furloughed staff.

“For instance, your employer could bring you back to work for two days a week. Your employer would pay you for those two days, as normal, while the furlough scheme would continue to cover you for the other three working days.”

This comes after a snap poll of hospitality industry leaders carried out by HIM and MCA, said contributing any amount would be impossible​ if they were not operating at full capacity.

Some 42% said they could contribute 0%, 10% said they could contribute 10% and 16% said they could contribute 20%.

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