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Extension of the Furlough Scheme

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02/11/2020

Following Boris Johnson’s announcement on Saturday 31 October of a further nationwide lockdown for England from Thursday 5 November 2020 until Wednesday 2 December 2020, the Government have also decided to extend the Coronavirus Job Retention Scheme (CJRS) until December 2020. The CJRS was due to end on Saturday 31 October 2020 and many employers will already have made plans to utilise its less generous replacement, the Job Support Scheme (JSS), which was due to commence on Sunday 1 November 2020.  So, what does this mean for employers who may have already started to bring employees back to work or for those who may be in the process of making other changes to their headcount or employees’ terms and conditions of employment?  Whilst there are still numerous unanswered questions, we set out how to handle these situations and what we know so far in our answers to FAQs below.

Who can claim the under the extended CJRS?

  • Employers small or large, charitable or non-profit, are eligible for the extended CJRS which will continue for a further month although the end date is yet to be confirmed.
  • Employers must have a UK bank account and UK PAYE scheme. There is no requirement for either the employer or employee to have used the CJRS previously.
  • Employees must be on an employer’s PAYE payroll by 23:59 30th October 2020. This qualification requirement will be welcome to many employers who have employees who have never previously qualified for the CJRS.  For example, this will mean that recent starters, as well as employees who have carried on working throughout the pandemic and have never been furloughed for three consecutive weeks before 1 July, will now qualify for the extended CJRS.

What are the key terms of the extended CJRS?

As under the previous CJRS rules:

  • Employees can be on any type of contract. Employers will be able to agree any working arrangements with employees so flexible furlough as well as full-time furlough will be permitted under the extended CJRS. Again, written agreement should be obtained to any changes to terms and conditions. It may be that a simple extension of current flexible furlough agreements can be used, accounting for any other changes that the employer wishes to make (for example, any changes to working hours).
  • Employers can claim the grant for the hours their employees are not working, calculated by reference to their usual hours worked in a claim period. It is understood that the calculations will broadly follow the same methodology as currently under the CJRS – we await further guidance from the Government on this point.
  • To claim the grant for furloughed hours, employers will need to report and claim for a minimum period of 7 consecutive calendar days.
  • Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
  • For worked hours, employees will be paid by their employer (subject to their employment contract) and employers will be responsible for paying the tax and NICs due on those amounts.

What does the extended CJRS grant cover?

  • For hours not worked by the employee, the Government will pay 80% of wages up to a cap of £2,500. The grant must be paid to the employee in full. The extended CJRS is therefore more generous for employers than the CJRS was in October and provides more support than the proposed JSS.
  • Employers will pay employer NICs and pension contributions, and should continue to pay the employee for hours worked in the normal way.  This means that the Government contribution level is the same as it was in August 2020.
  • As with the previous CJRS, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.

When can claims be made under the extended CJRS?

The Government will confirm this shortly.  The Government have stated that, “there will be no gap in eligibility for support between the previously announced end-date of CJRS and this extension” and “there will be a short period when we need to change the legal terms of the scheme and update the system and businesses will be paid in arrears for that period”.

What will happen with the JSS?

The JSS, which was scheduled to commence on Sunday 1 November, has been postponed until the extended CJRS ends.

What if employers have already agreed to change their employees’ contracts to reflect the terms of the JSS?

Assuming that the employer and its employees are eligible for the extended CJRS, employers should contact affected employees as soon as possible to explain that the JSS has been postponed and that the CJRS has been extended.  Employees can be asked to agree to continue on furlough (or flexi furlough) instead. In practice, it may be that a working pattern which was agreed under any JSS agreement can still be used – but the terms should be amended to clarify (and seek agreement) that it is a period of furlough which will continue.

What happens if employers were in the middle of a redundancy process?

It’s probably wise for employers to take some time to pause and consider what the extended CJRS may mean for the employer’s business before going ahead with redundancies – will it give the business much needed support in order to retain employees until trading can commence again?  It’s clear that the fairness of such decisions is more likely to be challenged in light of Saturday’s announcement.  Now more than ever, it is important to have good clear reasons for any reduction in headcount.

If you would like any advice or assistance please contact the employment team, details below.

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