Furloughed workers will be able to return to work part-time from July 1, the Chancellor has announced.
Giving the latest update on the UK Government’s job retention scheme, Rishi Sunak confirmed businesses must start paying towards their staff’s salaries from August – initially just 5% of it.
He also said a final self-employment coronavirus grant is to be made available for freelancers in August.
They will be able to claim up to £6570 from that date, giving those workers access to a total coronavirus grant of up to £14,070 each.
Businesses will also have to start paying National Insurance and tax contributions for staff in August, ramping up to 10% of furloughed wages in September and 20% in October.
Chancellor Rishi Sunak had previously announced the plan to get businesses to contribute to the scheme but he laid out further details on Friday.
He also said workers can return part-time without losing any furlough payments from July – a month earlier than previously planned, following lobbying from businesses.
But businesses must start bearing the costs and from August all companies using the furlough scheme must start paying NI and employer pension contributions.
In September and October, overall contributions from employers will rise to 10% and 20% respectively, the Chancellor added, but workers still furloughed will keep getting 80% of their wages up to £2500 a month.
The government will cover 70% of wages up to £2190 in September, the other 10% of wages paid with the employer, along with NI and pension contributions, making up 14% of the gross employment costs.
The following month, the Treasury will pick up 60% of wages up to a cap of £1875, with employers paying tax contributions and 20% of wages, representing 23% of the that worker’s costs.
The government added that only 40% of businesses had claimed the pension contributions since the furlough scheme was launched.
Companies can be flexible with their definition of “part-time” as long as a full-time employee has not returned to normal hours, say officials.
The Treasury said: “Individual firms will decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them – and will be responsible for paying their wages while in work.”
Since it was launched, the job retention initiative has been used by one million businesses to support 8.5m jobs in all four nations of the UK, at a cost of £15bn so far.
The scheme is expected to cost a total of around £80bn, or £10bn a month, although the Office for Budget Responsibility is set to publish detailed costs next week.
Business groups had asked the UK Government to ensure that those industries suffering hardest were most protected.
But the Treasury said it was not always clear which sector a business was in, insisting it would not rule out future support if required.
The Chancellor said: “Now, as we begin to reopen our country and kick-start our economy, these schemes will adjust to ensure those who are able to work can do so, while remaining amongst the most generous in the world.”
Sunak had faced calls, including from a cross-party group of 113 MPs, to extend the scheme for self-employed workers, which has so far seen 2.3 million claims worth £6.8bn.
The new grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6570 in total.
To combat fraud, employees will be able to report any concerns to HM Revenue and Customs.