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written by
Jack Stratten

Furlough extension: what it means for businesses

Budget briefcase

The chancellor recently stated that the UK's furlough scheme, which covers the wages of workers on leave because of coronavirus, will be extended until the end of October.

This is welcome news for small businesses throughout the UK, most of whom face an uncertain future and difficult financial decisions. But how will the extension work?

Getting back to work

A quarter of the UK workforce is currently on furlough, which is costing a remarkable £14 billion a month. And for that reason, the government knows there has to be a way of gradually ending the furlough scheme.

However, ending it too abruptly risks placing too much pressure on business.

The extension appears to be a very smart middle ground. Employees will continue to receive 80% of their salary, up to £2,500 a month, but the government will ask employers to start sharing the costs from August.

Then, the following changes will take place:

  • From the beginning of August, the government will stop making National Insurance and pension contributions
  • From September, the government will pay 70% of furloughed salaries
  • From October, this will decrease to 60%
  • From November, the scheme will officially end

This means employers will be encouraged to bring staff back on a part-time basis. That's a compromise that makes a lot of sense, and should give employers a valuable opportunity to bring employees back to work on a cautious and gradual basis.

It offers valuable reassurance for employees and employers alike, and should the spread of the virus continue to decline, the timing of this plan should work well for everyone. However, it is of course subject to change - depending on how infection rates change over the coming months.

 

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