Government announces furlough support as previously available at 1 August.
On 31 October the Prime Minister announced a new lockdown will come into effect in England from Thursday 5 November and that the Coronavirus Job Retention Scheme will be extended to cover this lockdown period (CJRS Extension).
So far, limited information has been made available online by HM Treasury. Further guidance is expected imminently. We look below at some immediate questions.
What has been extended?
In essence, the furlough scheme did not end on 31 October as originally intended. It is being extended to cover the lockdown in England which will start on 5 November and is expected to last until 2 December, with some amends to the level of support being provided.
What can be claimed?
The government will provide funding to employers for up to 80% of the cost of a worker's unworked hours up to a cap of £2,500 per month. However, employers will need to pay all National Insurance and pensions contributions on whatever is paid to the worker.
In effect, this puts the CJRS Extension in the position the furlough scheme was in on 1 August (see our previous article on the scheme on our website here and note the section ‘upcoming changes'). Eligible employers will be able to furlough staff full time or on a flexible basis.
Who is eligible?
CJRS Extension is open to UK employers who have a UK bank account and are registered on PAYE online with HMRC. As per previous iterations of the furlough scheme, the government does not expect organisations funded by public money to claim under the CJRS Extension, though organisations with a combination of private and public funding may do so where their private revenues have been disrupted.
Employers can make claims for grant funding in respect of staff they place on reduced hours, or who are furloughed full time, provided those staff have been included in the employer's Real Time Information submissions to HMRC on or before 30 October. The employment status of the individual (i.e. worker, employee or self-employed contractor) does not matter for these purposes.
This represents a significant widening of coverage of the furlough scheme, which had previously required staff to be on HMRC systems on or before 19 March (first version of the furlough scheme) or to have been furloughed for 3 consecutive weeks prior to 1 July (flexible furlough scheme). Employers do not need to have used the furlough scheme previously to use the CJRS Extension.
Can I still use JSS?
The launch of the JSS has been delayed, with plans for it to be brought in once the CJRS Extension has ended. At present the CJRS Extension is expected to run into December.
In the meantime, the JSS is not available. Many employers will no doubt have already written to staff to place them on the JSS. Unfortunately, those employers will now have to communicate with staff to clarify that the JSS arrangements are no longer coming into effect and/or communicate how they will move forward using the CJRS Extension, where relevant.
The terms of the CJRS Extension are more generous than the options provided for in the JSS and even more generous than the terms of the furlough scheme in October, as the government covered 60% of the cost of unworked hours up to a cap of £1,875 per month.
Is flexible furlough still an option?
Yes, the flexible elements of the furlough scheme are carried over to the CJRS Extension. This means staff can work part-time and be paid for the hours they work in the normal way, with up to 80% of their unworked hours being paid. It remains open to the employer and employee to agree to work part-time or be furloughed full time.
What else should I know?
Full guidance on the CJRS Extension is expected in the coming week and the scheme is likely to operate in much the same way as the furlough scheme did in August. However, there are a few points which appear to need clarifying:
The precise period being covered
The lockdown in England is scheduled to run from 5 November to 2 December. The implication is that the CJRS Extension, with a return to 80% funding on unworked hours, is linked to the planned lockdown. It is unclear precisely when these terms will apply – e.g. do they start 1 or 5 November? If it starts on 5 November, this raises the question of what funding options, if any, are available for employers between 1 and 5 November.
Can staff be re-hired and placed on furlough if they were dismissed on or before 30 October?
Employers may have had to dismiss staff ahead of the start of the JSS because the terms of this scheme were less generous and putting staff on to the JSS was not a viable option.
When the first iteration of the furlough scheme was launched, employers were permitted to re-hire staff they had dismissed before the scheme was brought in, provided they were on the employer's payroll on or before 19 March. It is not clear if this will be an option for the CJRS Extension.
When can claims for funding be submitted?
One feature of the furlough scheme which is more advantageous to employers than the JSS was that employers could claim for costs upfront. The JSS was designed to pay employers in arrears.
Although the CJRS Extension claim period is yet to be precisely defined (see above), employers are likely to have to claim at least some funding in arrears. More details about when employers can submit a claim are pending.
Placing staff on to the CJRS Extension
It is possible that some employers will be new to furlough when they look to use the CJRS Extension and that the staff they wish to claim funding for have not been furloughed before.
If so, employers need to ensure that the appropriate changes to staff contracts are agreed with those affected staff in writing in advance. In particular, employers must get the written agreement of staff to lower their pay, as otherwise they risk claims for unlawful deductions from wages claims, which we have previously covered in an earlier articles (available from our website, here). Where a collective agreement with a trade union is in place, employers should follow the proper procedures to seek to reach collective agreement to change terms.
Will this change employers' redundancy plans?
In addition, it is worth re-iterating that for employers who were in the middle of redundancy consultations, the CJRS Extension will now have to be factored into the employer's business case for making redundancies. It should also be considered as an alternative to redundancy, a way of reducing the number of redundancies or a means of mitigating their impact. Whilst an additional month's support is unlikely to prevent redundancies from happening, it may delay their requirement.
Under the proposed JSS, employers could not claim funding support from the government if the member of staff they were claiming for was on notice of dismissal. If the CJRS Extension carries over the same furlough rules, employers will be able to provide staff with notice of dismissal (including for redundancy) and claim funding under the scheme for those staff during their notice period.
Furlough funding was not previously available for employers to pay in lieu of notice or in respect of statutory redundancy payments. This is expected to be carried into the CJRS Extension.
Originally published by Wrigleys Solicitors , November 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.