Budget 2021: Coronavirus Job Retention Scheme extended until the end of September 2021

In the Budget 2021 on 3 March, the Chancellor announced that the Coronavirus Job Retention Scheme (also known as the furlough scheme) will be extended until the end of September 2021.

HMRC has not yet released detailed guidance in relation to the extension of the scheme, but we have shared what we know so far as this could potentially have an impact on businesses over the coming months.

What is the Government contribution?

The level of the grant available to employers under the scheme will remain unchanged until 30 June 2021 (80% of the furloughed employees wages, up to a cap of £2,500 per month, for the hours not worked when an employee is either fully-furloughed or flexibly-furloughed).

From 1 July 2021, the Government’s contribution will reduce to 70% (up to a monthly cap of £2,187.50). This will further reduce from 1 August 2021 to 60% (up to a monthly cap of £1,875) and will remain at this level until 30 September 2021.

The furloughed employee must continue to receive 80% of their wages for the hours that they are furloughed and not working throughout the period to 30 September 2021 (subject to the monthly cap of £2,500). This means the employer will be required to contribute 10% in July and 20% in August and September towards the cost of their furloughed employees’ wages.

In addition, the employer will need to continue paying employer National Insurance contributions and employer pension contributions which cannot be claimed for under the scheme.

Which employees are eligible?

For claim periods ending on or before 30 April 2021, a furloughed employee’s wages can be claimed for under the scheme as long as they were employed by you on or before 30 October 2020 and included on a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020.

From 1 May 2021, employees can be furloughed and a claim for their wages can be made under the scheme as long as they were employed by you on 2 March 2021 and included on a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 2 March 2021.

What about variable paid employees?

Where an employee receives variable pay, the claim that can be made under the scheme for the employee’s wages is based on the higher of the employee’s average wages earned in a period (which varies depending on whether the employee was employed by the business on 19 March or not) and the wages earned in the corresponding calendar period in a previous tax year.

The corresponding calendar period until the end of February 2021 was the corresponding period in the previous year i.e. for February 2021 the ‘lookback period’ was February 2020.

From March 2021, the lookback period is the most recent corresponding period that fell before 1 March 2020 i.e. for March 2021 the lookback period is March 2019. This is to ensure that the lookback period does not include any period where the employee was on furlough.

Contact us

Should you have any queries, please contact Clair Williams (clair.williams@taitwalker.co.uk) or Rachael Matthewson (rachael.matthewson@taitwalker.co.uk).