Updated: Jul 8, 2021
Watch the video below or read the article to understand the changes to the Furlough Scheme from 1st July 2021.
Where did it all start...
On the 16th March 2020, the Prime Minister had issued guidance for the public stating that if anyone has or thought to have Covid, they were to avoid going to Restaurants for a set period of time.
Few days later, 20th March 2020, the Prime Minister announced that all Restaurants were to close that night and not to open the following day, although they could operate as a takeaway. On the same day, the Furlough Scheme was announced, a scheme designed to reduce the number of redundancies across UK Businesses.
The Furlough Scheme was launched on the 20th April 2020 and businesses were able to claim back 80% of their staff wages up to a maximum of £2,500, assuming the business qualified. The business could also include the employers NI and employer pension contribution within the claim.
The Furlough Scheme has gone through many changes since its launch back in April 2020, for example, we had the Flexible Furlough scheme introduced from 1st July 2020 allowing employers to bring back their employees gradually whilst being able to claim under the furlough scheme for the hours not worked by the employee.
The Furlough Scheme was originally supposed to end in May 2020 but the scheme is still active today and is now due to end at the end of September 2021.
The Furlough Scheme
The current Furlough Scheme allows you to claim 80% of your staff wages for those hours not worked, however you cannot include the employers NI or the employers Pension contributions into your claim like you could when the scheme originally launched back in April 2020. The amount you can claim is capped to £2,500 per employee per month.
Changes to the Furlough Scheme from 1st July 2021...
From the 1st July 2021, employers will now only be able to claim 70% of their furloughed staff wages and employers will also have to contribute 10%. The 70% claim is capped to £2,187.50 per month per employee and the employer contribution is capped to £312.50.
For example, if you have an employee and their regular pay is £1,800, you will have been making a furlough claim for £1,440 which represents 80% of your employee's pay. However from 1st July 2021, you can only claim £1,260 (70%) and as an employer, you will be required to contribute £180 (10%). This leaves your employee receiving £1,440 (80% of their regular pay).
As an employer, you may wish to then contribute the difference of £360 (£1,800 - £1,440) so the employee continues receiving their original pay.
Have you prepared for the changes?
If you have not prepared for the additional cost, now would be a good time to work with an Accountant to understand how this will impact your cash flow and what strategies are available to you to help retain your staff whilst keeping enough cash in your Restaurant to keep it going.
There are further changes to the Furlough Scheme from 1st August 2021 so keep a look out on our website or subscribe to our YouTube Channel.
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