Furlough Scheme Ends: What Are The Implications For Payroll Services?

The UK Government has announced that the Coronavirus Job Retention scheme (furlough) comes to a close on 30th September 2021. The dissolving of the scheme comes after 19 months of providing financial pandemic relief to UK business.

As the economy re-opens fully, this short report explores what’s next for employers and employees and the impact on payroll professionals in the UK.

The operational impact on payroll providers

The operational impact on payroll providers in the early stages of the pandemic, and throughout has been enormous. As the Government devised and announced their strategy for job retention during economy closures, payroll teams had to adapt at pace to meet new processes and HMRC requirements.

Incremental changes and various iterations as lockdowns extended and lifted added additional responsibilities and pressures to payroll teams.

Deadline for payroll services claims is 14th October

The HMRC led job retention scheme has supported around 11.6 million jobs since it launched in March 2020, at a cost of £66 billion to the UK economy.

The Government has set a deadline for all claims for September 2021 to be submitted to HMRC before 14th October 2021, with any amendments made no later than 28th October 2021.

Government Covid-19 funds will continue to pay employees 60% of wages to a maximum of £1,875 for those hours which employees were furloughed until the end of September.

Ministers have further reminded payroll professionals that they must top up employee wages from 1st July 2021 to ensure they are in receipt of a full 80% of their usual monthly wage, up to £2,500. They may provide additional top ups beyond that at their own discretion.

As with previous months, employers remain responsible for employee pension and National Insurance Contributions (NICs)

Furlough – a UK success?

While it’s estimated that the true cost of the furlough programme accounted for a fifth of the Government’s entire Covid-19 response budget, there is cautious optimism that the scheme has been an economic success. Early pandemic estimates indicated that one in 10 workers would lose their jobs during the health crisis. The unemployment rate today is currently less than one in 20.

However, as the economy fully re-opens, the months ahead will highlight whether employers can afford to continue operations at full team capacity or table redundancies to operate in the new trading environment. For some, the consultation process may have already begun.

Just as the additional obligations of furlough administration ends, payroll services may find their remit takes on greater responsibilities as they manage redundancy processes and payments at scale.

Beyond furlough for Payroll professionals

Data indicates that in the last eight months, as lockdown’s eases somewhat, nearly three million people moved off off furlough. Some two million people remain on the scheme. Beyond furlough, employers are exploring how the big return to work – and meeting the full cost of full team salaries – is managed.

When the job retention scheme comes to a close, the final claim has been submitted and contributions allocated, your payroll obligations under the scheme end. For the months ahead, firms will return to standard payroll provision with employees back on pre-furlough terms and conditions.

Team members on furlough should return to work on 1st October, unless advised otherwise.

Outsourced payroll management

There is no doubt that these last 19 months have been difficult for payroll services. Many payroll professionals themselves were furloughed, whilst the skeleton staff left holding the fort juggled additional administration, challenging calculations and increased regulator obligations.

Perhaps it’s time to consider outsourcing payroll to a payroll services provider?

For a free, no-obligation quote – get in touch with one of our payroll services specialists today.