The Budget was announced on 2 March 2021 and the Chancellor, Rishi Sunak, announced measures that affect both employees and employers. With April approaching, we also have the new statutory figures that will apply to various employment situations, including calculations of statutory redundancy pay.
Extension of the furlough scheme
Of particular note, is that the furlough scheme (officially known as the Coronavirus Job Retention Scheme) has been extended beyond the end of April and is now scheduled to run until the end of September 2021.
Throughout the scheme, fully furloughed employees have been entitled to 80% of their salary for hours not worked, up to £2,500 per calendar month. This is applied pro rata for those on flexible furlough. The government’s contribution has changed at times since introduction of the scheme, but it currently contributes 80% of the employee’s salary, with employers only being asked to cover National Insurance and pension contributions.
This is once again set to change. Fully furloughed employees will continue to receive 80% of their salary (subject to the cap) from their employers, but the sums reimbursed by the government to employers under the scheme will incrementally reduce, meaning that the sums paid by the employer will correspondingly increase. The proportions for fully furloughed employees will change as follows:
- From July 2021, the government will cover 70% (up to £2,187.50 per calendar month), requiring that employers fund the remaining 10%; and
- From August to September 2021, the government will cover 60% (up to £1,875 per calendar month) with employers funding 20%.
Throughout this period, the employer must continue to pay both National Insurance and pension contributions. Employers may top up their employees’ wages to 100%, however, there is no obligation to do this.
The furlough scheme was originally due to close on 31 October 2020 and be replaced by the Job Support Scheme (as announced in the Winter Economy Plan). There has been no indication of when, or indeed if, this change will occur.
Changes to statutory figures
The government has announced the annual increases applied to various statutory figures. These include the statutory cap applied to a week for various legal purposes, including calculating statutory redundancy pay and calculating some Employment Tribunal awards. The most notable changes include:
- From 6 April 2021, the statutory cap on a week’s pay will rise from £538 to £544. This affects various matters, including statutory redundancy pay calculations and the basic award in unfair dismissal claims. The compensatory award for unfair dismissal is capped at the lower of one year’s pay or £89,493 (increased from £88,519).
- From 1 April 2021, the National Minimum Wage will increase from £8.72 to £8.91 (for adults over 23 years old).
- From 4 April 2021, Statutory Sick Pay (SSP) increases to £96.35 per week (from £95.85).
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