UK furlough Q&A: All you need to know about the coronavirus job retention scheme

1. What is the furlough scheme?

It’s officially called the Coronavirus Job Retention Scheme and was launched in March . It allows employers to stand down workers but then claim a cash grant of up to 80% of their wages, capped at £2,500 a month. The money is claimed by the company and distributed to staff, so individuals don’t have to do anything themselves. Some employers decide to make up the 20% difference, some do not.

2. How many people are on the scheme?

Huge numbers – the government revealed on Tuesday that the scheme is currently paying out to around 7.5 million employees, a quarter of Britain’s private sector workforce. It has been used by 935,000 companies.

3. How is it changing?

It is being extended for another four months, to the end of October 2020 but with a number of changes. Crucially the 80% rate is being retained, squashing concerns that Chancellor Rishi Sunak would cut the government contribution to 60%.

The big change, which will come into force from the start of August, is that workers will be able to return to their jobs part-time. At the moment companies must choose between putting staff into complete furlough, where they do not work at all, or keep them on full pay. From August furloughed workers will be able to return to work part-time with employers being asked to pay towards the salaries of their furloughed staff.

The government said it is also exploring ways in which people can do additional training or learn new skills while they are furloughed and their employer is receiving money from the government.

4. What does it mean for employers?

The 80% pay level will remain, but companies will have to start contributing for staff that return part-time. There are currently no details of what companies will be asked to pay, but it could be that employers have to pay 20% of their furloughed employees’ salaries, while the government pays the remaining 60%.

The chancellor said: “We will ask employers to start sharing with the government the cost of paying salaries.”

In its official advice, the Treasury said: “The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.”

Employer groups welcomed the deal, but said they needed more details. Mike Cherry, of the Federation of Small Businesses, said: “We await further detail on the contributions that will be required of small employers after July. We need to ensure that those obligations are affordable for the many businesses that have had no revenue coming in for months now, but still have fixed overheads to worry about.”

5. What does it mean for workers?

This deal paves the way for workers to begin a partial return to employment and probably means that employers will be less likely to make them permanently unemployed in the coming weeks. But it is still another 10 weeks before the part-time scheme begins and in the meantime some employers may still decide to make deep redundancies. In that case, the employee will have to apply for universal credit.

6. I’m self-employed. Am I being offered anything?

The government said there will be no changes to the scheme until July. It is currently offering self-employed people a taxable grant based on their previous monthly earnings over the last three years, worth up to 80% of earnings and capped at £2,500 a month. To be eligible, you must have annual “profits” (self-employed earnings) of less than £50,000 a year, according to HMRC.

The scheme has been criticised for leaving some groups of the self-employed without a safety net.

7. How much will it cost?

The Institute of Fiscal Studies estimates the likely cost over the whole of the period from March to July will be around £60bn – or £12bn a month.

8. How does the scheme compare with those available in other countries?

The German scheme, called Kurzarbeit, is expected to cost at least €40bn. It currently covers 10 million workers and is among the most generous, paying up to 67% of net wages lost due to shorter hours, to a maximum of €6,700 per month for employees with children, and 60% for those without children. Unlike the British scheme, German firms can allow staff to work part-time, reducing the cost.

In France, more than 12 million are covered by a scheme called Chimage Partial which has cost €26bn so far. It offers 70% of salary on up to €6,927 gross per month. Employees on minimum wage (SMIC) receive 100% . As with the German scheme, firms can claim just part of a worker’s salary and many do, limiting the cost to the finance ministry.

Ireland’s Temporary Wage subsidy scheme is providing support for 450,000 workers. Since 4 May the scheme has become more generous, paying an 85% subsidy up to €21,400. Like the UK scheme it compels claimants to stay at home and not work, but the Irish government has signalled that will be changed.