The government is expected to ban companies from furloughing any more staff

Wednesday, 27th May 2020, 12:42 pm
Updated Wednesday, 27th May 2020, 2:25 pm
(Credit: Getty Images)
(Credit: Getty Images)

Chancellor Rishi Sunak is expected to announce the end of new furlough applications, as the government plans to gradually bring the scheme to a close, a new report suggests.

According to The Financial Times, the Chancellor is likely to announce a plan of changes by the end of this week.

While the government scheme has been extended to October 2020, Mr Sunak is also expected to give details of the job retention scheme that will see companies paying a minimum of one fifth of their furloughed employees’ wages, starting from August 2020.

The predicted changes come after the Office for Budget Responsibility warned that the scheme could cost the government up to £80 billion.

What are the current furlough rules?

As it currently stands, employers are fully compensated by the government for 80 per cent of their furloughed employees salary, up to a limit of £2,500 a month.

This allows companies to retain their employees while lockdown keeps businesses closed, and for furloughed staff to keep receiving a salary.

Businesses with furloughed staff are also currently fully compensated for any pension contributions paid, as well as employer national insurance contributions.

The scheme is currently subsidising salaries for roughly a third of the private sector’s workforce.

What are the newest changes expected to be?

Signs of the government’s effort to wind down the furlough scheme came on 10 May, when Boris Johnson announced that anyone who is able to safely return to work was expected to do so.

The scheme’s newest changes are expected to include stages whereby businesses will start to cover more of their workers' wages - for example increasing their contribution from 20 per cent to 30 per cent - in order to gradually wind down the furlough scheme.

A Treasury source said, "We’ve got two full months of support left and afterwards the government will help to pay people’s wages, but it’s fair to everyone that businesses contribute as they get back to work."

The planned changes are also expected to include furloughed workers being allowed to return to work on a part-time basis, while remaining part of the scheme.

When will the changes be put in place?

According to The Financial Times, the Chancellor will place a ban on new applications for furloughed staff into action from the end of July.

Other expected changes will occur gradually in response to the easing of lockdown.

Earlier this month, when speaking in the House of Commons about possible changes to the scheme, Rishi Sunak said, "Full details will follow by the end of May.

“Until the end of July there will be no changes whatsoever. Then from August to October, the scheme will continue for all sectors and regions of the UK but with greater flexibility to support the transition back to work.”