- 04 Mar 2021
- 2 min read
Employment Alert – Budget – Employment Announcements
It was the worst kept secret in the budget, but the Chancellor has indeed announced that the furlough scheme will be extended until the end of September 2021.
He also confirmed increases to the minimum wage rates from 1 April 2021 and that the age threshold for employees who receive the highest rate minimum wage will decrease from 25 to 23.
Why is this important?
The extension of the furlough scheme had effectively already been pre-announced before the budget. Nonetheless, the length of the extension – to the end of September – went further than most people were expecting.
Perhaps in recognition of the fact that lockdown measures will be ending over the summer (hopefully!), employers will be required to contribute a proportion of pay for the unworked hours of their furloughed employees from July. This is in addition to the national insurance and pension contributions that employers already have to pay.
For unworked hours in July, employers will need to contribute 10% of a furloughed employee’s wages. This will increase to 20% during August and September. Employers will continue to be liable to pay employees for any worked hours in accordance with the employee’s employment contract.
This increased contribution from employers appears to echo the furlough provisions that applied in September and October last year, when employers were also required to contribute to wages in this way. The rules and provisions which applied then are also likely to be applicable for employers who furlough any staff from July onwards, however this is yet to be confirmed. See link to our previous update on this here!
The increase to the minimum wage rates in April will come as no surprise to employers (as they increase every year). But what may catch some employers out is that the age thresholds are also changing. Currently only employees aged 25 and over are entitled to the highest minimum wage payment. This will change to those aged 23 and over, and so many more employees will be entitled to this higher wage rate.
What should you do?
- For those employees remaining on furlough, ensure any furlough agreements are up to date and effective.
- Consider whether you will continue to furlough staff from July onwards, and – if you are planning to do so – you should budget for the increased costs of this.
- Keep this under review and consider how you will proceed if you do not wish to keep staff on furlough leave when the costs increase.
- If and when staff will be returning to work following furlough, you should ensure that there is a plan for their reintegration into the workplace. Ensure your employees are kept up to date.
- Carry out a national minimum wage review of any staff who are paid at (or close to) the minimum wage to ensure that employees continue to receive at least the minimum wage when it increases in April 2021.
If you need more information please contactus on 0800 2800 421 or email [email protected] to find out how we can help.