Coronavirus Job Retention Scheme: What’s the status?
Posted on 5th June 2020
The government has made some further announcements and issued further guidance on the extension of furlough until 31 March 2021. Please refer to our summary of these updates here.
Disclaimer – This article is an update to our 21 April 2020 publication on the guidelines of the government’s Job Retention Scheme. Since then, there have been some new announcements and updated guidance from HMRC and the Chancellor on the future of the scheme.
The UK government recently announced a series of updates to their Coronavirus Job Retention Scheme, last outlined in late April 2020. The new guidelines clarify several issues and queries, as well as including new measures reflecting the evolving employment market during the current crisis.
We are in unprecedented times and the government’s guidance is constantly being updated so it is therefore crucial that you keep up to date with the latest updates. This note gives general guidance and an overview only but is not intended to be legal advice.
What are the upcoming changes to the Job Retention Scheme?
The government announced an extension to the furlough scheme through until 31 October 2020 with some added flexibility from 1 July 2020.
From 1 July 2020, employers will be able to bring furloughed employees back to work on a part time or reduced hours basis. Employers will be able to continue to claim from the scheme for the hours that the furloughed employees aren’t working. The grant and the £2,500 cap on the furlough scheme will be reduced in proportion to the hours not worked.
For example, if a furloughed employee is asked to return to work two days a week, the employer will pay for those two days in full as usual, whilst continuing to claim 80% of the furloughed employees wages through the scheme for the three days that the employee is not in work. It is still open to employers to continue with employees on full furlough if there is not the work for them to do.
There may be further announcements regarding a more flexible scheme. A few key points to remember include:
- Change to minimum period for furlough claim. Employers will need to report and claim for a minimum period of a week (vs three weeks currently).
- Written employee agreement. To be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing.
- Deadline to put employees on furlough. The scheme will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June. This means that the final date by which an employer can furlough an employee for the first time passed on 10 June. Although not clear in the current guidance, it should be possible that employees who are already back at work prior to end June can still be put on ‘flexible furlough’ so long as they were furloughed for a full three-week period at some point prior to 30 June.
- Maximum claim cap. From 1 July, employers will not be able to claim for more employees than the maximum number they have claimed for under any previous claim. If an employer anticipates having to put additional staff on furlough after 1 July, they will need to put this number on furlough and make a claim for them in June.
- Still no grant for new starters. The Government has not changed its guidance on new starters. It remains that to be entitled and eligible to be furloughed, employees must have been on the payroll and notified to HMRC on an RTI submission on or before 19 March 2020.
Changes to government salary contribution
From 1 August 2020, employers will be required to contribute towards the salaries of their furloughed staff. Employees will continue to receive 80% of their current wages, up to £2,500 a month, with employers paying a portion of the total percentage.
The Government has published this table setting out how the level of the grant will be slowly tapered from 1 August onwards.
Employer NICs and pension contributions1
|Government contribution: wages||80% up to £2,500||80% up to £2,500||70% up to £2,187.50||60% up to £1,875|
|Employer contribution: employer NICs and pension contributions2||No||Yes||Yes||Yes|
|Employer contribution: wages||–||–||10% up to £312.50||20% up to £265|
|Employee receives||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month|
1,2 Government contribution covers employer NICs and pension contributions (up to an amount equivalent to the minimum automatic enrolment employer pension contribution) calculated on 80% of wages up to £2,500 a month.
Employer contributions are mandatory from 1 August. If an employer cannot afford contributions, they will not be able to continue with their staff on furlough. At this point employers will have to consider other options such as agreeing new terms and conditions (reduced hours/pay) or redundancies.
The Government indicated that the scheme will not be extended beyond 31 October, but this will be kept under review and will likely reflect the status of the ongoing Covid-19 crisis.
Recent clarification of furlough issues and queries:
- Written agreement: Agreement to furlough must be in writing or confirmed in writing (which includes by email). The written confirmation must specify the main terms and conditions of the furlough. An employee doesn’t need to provide written agreement to the furlough terms.
- Regular payments covered by scheme: Variable payments, for example based on performance, such as commission, or over-time, cannot be claimed for unless they arise from a legally enforceable agreement, understanding, scheme or transaction which prescribes the method of calculating the amount payable (whether or not that involves the exercise of discretion by the employer).
- SSP: An employee who is eligible for SSP can be put on furlough provided the employer and employee agree to end SSP and move to furlough.
- Directors: Employed directors who are themselves furloughed, in addition to fulfilling their statutory duties, can make CJRS claims and pay employees’ wages without being in breach of the ‘no work’ rule.
- Holiday: Employees will continue to accrue holiday while they are furloughed and the new holiday guidance confirms that furloughed employees can be on holiday during furlough. The holiday guidance confirms that employers can cancel an employee’s holiday if they give the required amount of notice under the WTR (by giving notice of the same number of days as the holiday the employee wanted to take, e.g. five days’ notice to prevent or cancel five days of holiday). Also, employers can require employees to take holiday during furlough, paid at the usual holiday rate.
They would need to give twice as much notice as the length of the holiday they want employees to take (e.g. ten days’ notice for five days’ holiday) unless their employment contract says something else.
- Training: Training will not count as work where the purpose of the training is to improve an employee’s effectiveness or the performance of the employer’s business. The training should not contribute (to a significant degree) to the production of any goods the employer intends to supply (as part of the provision of goods or services) or to the supply of any services for which consideration is received.
Visit the government website for further guidance and clarification on the operation of the scheme, as well as further announcements in the future.