The Chancellor announced at the beginning of November that the Coronavirus Job Retention (Furlough) Scheme (CJRS) would be extended across the UK until 31 March 2021. Guidance about how the scheme would operate during this extension was published on 10 November and this was followed by a Treasury Direction published on 13 November. The guidance comprises a number of updates to the coronavirus business support guidance on the HMRC website including:
- Claim for your employees’ wages through the Coronavirus Job Retention Scheme
- Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme and
- Calculate how much you can claim using the Coronavirus Job Retention Scheme.
The extended CJRS is significantly more generous to employers than the reduced level of government support on offer in October and under the proposed Job Support Scheme. The government will review the CJRS in January 2021 to consider whether the economic circumstances are improving enough to ask employers to contribute more and we expect further guidance to be issued in due course if a gradual scaling back of the scheme is proposed. In the meantime, the introduction of the Job Support Scheme (JSS) (both the Open and Closed) has been postponed and the Job Retention Bonus has been withdrawn. A replacement retention incentive has been promised.
In this note you will find details of the changes that will apply from 1 November until the scheme closes at the end of March 2021. For details about the scheme in its previous iterations (much of which will continue to apply to the extended CJRS) please see our insights on the Coronavirus Job Retention Scheme - from March to July 2020 and the Coronavirus Job Retention Scheme – from July to October 2020.
What are the key changes to the scheme from November?
The CJRS will now run until the end of March 2021 and will operate in a similar way to the original CJRS in August. Employers can continue to claim for employees on furlough for periods ending on or before 31 October 2020 until the deadline on 30 November 2020. The terms of the extended CJRS will then apply and employers may apply from 11 November for periods from 1 November. The extended CJRS will operate as the original CJRS did, with businesses being able to be paid upfront (as opposed to in arrears under the JSS) to cover wage costs.
The key changes are:
- The level of grant under the extended CJRS mirrors levels available to employers under the original CJRS in August. This means that the government will pay up to 80 per cent of an employee’s normal pay up to a cap of £2,500 and employers will be responsible only for National Insurance Contributions and pension contributions. As with the original CJRS, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.
- To access the extended scheme, neither the employer nor the employee needs to have previously used the CJRS. This is a significant change to the original CJRS, where the vast majority of employees had to have been furloughed for a period of at least three consecutive weeks ending on or before 30 June to enjoy continued access to the scheme through July to the end of October.
- There is also no maximum number of employees that an employer can claim for from 1 November 2020.
- The new guidance confirms that employers are able to furlough employees who are unable to work because they are clinically extremely vulnerable, or at the highest risk of severe illness from coronavirus and following public health guidance or who are unable to work because they have caring responsibilities resulting from COVID-19, including employees that need to look after children.
- As per the original CJRS, a new employer is eligible to claim in respect of employees of a previous business transferred if the TUPE or PAYE business succession rules apply and the employees being claimed for have been employed by their prior employer on or before 30 October 2020 and transferred from them to their new employer on or after 1 September 2020.
- Importantly, employers will not be able to claim for employees who are serving contractual or statutory notice for claim periods on or after 1 December. This includes where employees have resigned and also applies where notice was served before 1 December (although claims for notice in the period before 1 December are permitted). This restriction may be problematic for employers who are thinking of re-employing, or have re-employed, people in order to take advantage of the scheme extension. Employers will need to bear this in mind if redundancies are likely over the coming months.
Which organisations are able to apply?
All UK employers, (including individuals who employ people), which operated a PAYE scheme on or before 30 October and have a UK bank account are eligible to make a claim, whether their business remains open or closed. The government expects that publicly funded organisations will not use the extended scheme, as was the case for the original CJRS, but partially publicly funded organisations may be eligible where their private revenues have been disrupted. All other eligibility requirements will continue to apply.
Importantly the Direction also states that HMRC must publish information about employers who make claims in December and January which, includes the employer’s name and the amount claimed under the CJRS although HMRC may publish a ‘reasonable indication of the amount claimed’ rather than the exact amount. Information must be published within 3 months from the end of the month for which a claim was made. The information will be taken down 12 months after publication.
Which employees are eligible?
Employers can claim for employees, on any type of employment contract, who were employed and on their PAYE payroll on 30 October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. The employees do not need to have been previously furloughed.
Employees that were employed and on the payroll on 23 September 2020 who were made redundant or stopped working for their employer afterwards can be re-employed and claimed for. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees. Similarly, an employee who was on a fixed term contract, on payroll on 23 September, and that contract expired after 23 September can be re-employed and claimed for, provided that the other eligibility criteria are met. However, employers will need to consider very carefully the implications of rehiring an employee particularly if employees on notice are not eligible for grants under the scheme.
Is flexible furloughing possible?
Flexible furloughing will continue to be possible, in addition to full-time furloughing, so employees will be able to work some of their hours (and be paid for this by their employer) and receive furlough pay for unworked hours.
Calculations determining usual hours and worked hours will broadly follow the same methodology as under the original CJRS. For employees who meet the eligibility criteria and were previously furloughed, employers must use the same calculations for calculating reference pay and usual hours. For those employees who meet the criteria of the extended scheme but were not previously eligible under the CJRS, alternative calculations will need to be used. The various guidance sets out numerous worked examples to assist employers with these calculations.
As with the original scheme, employees cannot undertake any work for their employer during the hours that the employer records them as being on furlough but they can, as previously, take part in training, volunteer for another employer or organisation or work for another employer (if contractually allowed).
Putting into place agreements retrospectively
In view of the timing of the announcement, the guidance states that employers may put into place furlough agreements retrospectively to have effect from 1 November, but makes it clear that only retrospective agreements put in place up to and including the 13 November 2020 may be relied on for the purposes of a CJRS claim. Written records will need to be kept of the agreement for 5 years and a record of how many hours the employee worked and the number of hours the employee was not working and on furlough, will need to be kept for 6 years.
Employers need to consider their position carefully as difficult decisions around redundancies and restructures may need to be revisited in light of the extension of the furlough scheme. However, given that the future continues to remain uncertain, we appreciate many employers will want to consider various ways in which to reduce workforce costs - to help with this we have two webinars, which you can access here.
In the meantime for as long as you continue to claim under the scheme, keep a record of how you arrived at the amounts you are claiming together with the government guidance upon which you sought to rely so you are well-prepared in the event that HMRC raises any issues in relation to your claim.
We have been advising many employers on the issues arising out of this scheme as well as advising on redundancy and other programmes of cost-savings. If we can help your organisation, please contact Luke Bowery or any other member of our employment team.
Key links to the current government guidance:
- Guide for employees to the CJRS
- Guide for employers to check which employees they can put on furlough to use the CJRS
- Check if you can claim for employees' wages through the CJRS
- Claim for wages through the CJRS
- Reporting payments in PAYE RTI from the CJRS
This briefing gives general information only and is not intended to be an exhaustive statement of the law. Although we have taken care over the information, you should not rely on it as legal advice. We do not accept any liability to anyone who does rely on its content.