What you need to know about the UK Furlough Scheme

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The UK government created the Coronavirus Job Retention Scheme in March 2020 to help workers continue to be paid while businesses were closed due to the pandemic. The furlough scheme provided 80% of employee wages up to a cap of £2500 per month. After July 1, the scheme is changing. Here is what you need to know about the UK furlough scheme.

Beginning July 1st, employers were able to bring back employees part time and still receive furlough benefits for the hours not worked. Starting in August, employers will have to contribute to National Insurance and Pension contributions for the hours employees are on furlough, and pay employees for the hours they work. Your payroll team must ensure the proper calculations for NIC and pension contributions based on furlough hours versus worked hours.

As of September 1st, the government will reduce furlough payments to 70% of employee salaries up to a cap of £2187, so employers must make up the 10% difference (or up to £2500) to ensure employees are receiving 80% of their wages. In October, the government contribution will be 60% of wages with a cap of £1875 per month, which means employers will have to contribute 20% of the remaining wages up to a cap of £2500.

The furlough scheme is scheduled to end as of October 31st, so these payroll and national insurance contributions will be changing each month until then. Payroll for your UK employees will be affected for the next several months, so it is important to be aware of the monthly updates, ensure your payroll process can accommodate the changes to wages and contributions, and verify that you are meeting the wage caps and requirements.

If your payroll in the UK is affected by the furlough scheme and you need help navigating the changes, our cloud-based technology and in-country experts can help. Our software updates automatically with the changes, and our team of experts can help with any compliance concerns. Click here to get help for your UK payroll

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