11 November 2020
A lot has changed since 31 October 2020 when the Coronavirus Job Retention Scheme (CJRS, or furlough scheme) was due to come to an end and the Job Support Scheme (JSS) was due to begin (in both “open” and “closed” formats).
On that Saturday evening, with about 5 hours to go, the Prime Minister and Chancellor made a last-minute announcement that the furlough scheme would be extended for one month “until December” and the JSS would be delayed until then.
Limited guidance was published and we were told the Government would pay 80% of employee wages for hours not worked up to a cap of £2,500 per month. Employers rushed to communicate this announcement to staff, withdrawing JSS agreements and advising employees they would be re-furloughed until December 2020 where appropriate.
On 5 November, the Government then announced that the furlough scheme would not simply be extended for 1 month, but would be extended for a further four months to 31 March 2021. Some detail of the scheme was provided, but with a promise that “full guidance will be published on 10 November”.
A key date for employers was Friday 13 November, as the government advised that while employers could retrospectively put employees on the extended furlough scheme and backdate that to 1 November, they could only do so if the agreement was in place by 13 November 2020.
As promised, further guidance was published yesterday evening. This guidance is made up of several different documents and provides some much-needed clarity. However, we await further detail on a few issues and even more guidance is expected by the end of the month.
Here’s what we know so far:
Duration and amount of grant
- For the period 1 November 2020 to 31 January 2021, the employer can claim 80% of an employee’s “usual salary” for hours not worked up to a cap of £2,500 per month (pro rated to the hours not worked).
- Employers can choose to top up this payment, but are not required to – if they decide not to, they will need to obtain employee agreement to the reduction.
- Employers will pay employer NICs and pension contributions on the full amount paid to the employee.
- The scheme will be reviewed in January 2021 to consider whether employers will have to make a wage contribution thereafter from January 2021 to March 2021.
- Employers are eligible to claim the grant where they cannot maintain their workforce because operations have been affected by coronavirus.
- The scheme is open for employees who were employed on 30 October 2020 and where a RTI submission was made in respect of them between 20 March 2020 and 30 October 2020.
- It is also open to employees who were made redundant or stopped working on or after 23 September 2020 if they are rehired. Rehiring employees who were made redundant will have to be carefully considered in terms of any future entitlement to notice pay, or possible claims which could be brought at that stage.
- Employers can claim for employees on any type of employment contract, including full-time, part-time, agency, flexible or zero-hour contracts.
- Employers do not need to have previously claimed for an employee before 30 October 2020 to claim for period from 1 November 2020.
- There is no maximum number of employees that an employer can claim for from 1 November 2020 (in contrast to the previous rules where employers could only claim for the maximum number of employees who were furloughed as at 10 June 2020).
- Employees returning from maternity leave can be furloughed but only where they have given the 8 weeks statutory notice to end maternity leave early.
- In addition to employees affected by a downturn in operations due to coronavirus, certain employees can be furloughed for health or other reasons. However, this is more limited than before: employers can now furlough staff who are unable to work because they are extremely vulnerable, or at the highest risk of severe illness from coronavirus and following public health advice. Those with caring responsibilities resulting from coronavirus, including employees looking after children, can also be furloughed.
Calculation of usual hours and salary
The rules for calculating normal hours and salary are extremely complex and beyond the scope of this blog.
The rules vary according to:
- Whether the employee received fixed or variable pay
- Whether they were on the payroll in March 2020
- Whether they have been furloughed previously
Contact us for detailed advice.
- Employees can be furloughed for any amount of time and for any working pattern (and employers claim the grant for unworked hours).
- There is no minimum furlough period, but the period that can be claimed for must be a minimum of 7 calendar days.
- Employers should keep records of how many hours employees are working and the number of hours they are not working.
- The employer must confirm in writing to the employee that they have been furloughed.
- Unless the employer has the contractual right to vary hours and pay, it will be necessary to get the employee’s agreement to the changes, and we would strongly recommend that express written (or emailed) consent is obtained from each employee.
- As above, employers can agree to retrospectively furlough employees from 1 November to 13 November 2020 as long as an agreement is entered into by 13 November 2020, which is this Friday.
- As was previously understood, furloughed employees continue to accrue leave per their contract of employment.
- Employees can take holidays during this furlough extension and any hours taken as holidays during a claim period can be treated as furloughed hours (eligible for the scheme).
- The employer can therefore claim 80% of employee holiday pay from the government, but will be required to top that up to 100% as has previously been the case.
- Employers may seek to insist that employees use their accrued holiday during furlough so as to benefit from the government grant and avoid being hit with a hefty accrued holiday pay bill when the scheme ends. This may lead to resistance from staff, arguing that this would not be a proper enjoyable/relaxing holiday.
- It was clear that under the previous furlough scheme, employers could claim furlough pay for employees who are serving a contractual or statutory notice period, although furlough grants cannot be used to substitute redundancy payments or a payment in lieu of notice.
- One section of the new guidance says that employers “can continue to claim for a furloughed employee who is serving a statutory notice period, however, grants cannot be used to substitute redundancy payments”. There is no mention of contractual notice periods.
- However, a different section of the guidance then states that the government is reviewing whether employers should be able to claim for employees serving contractual or statutory notice periods and will change the approach for claim periods starting on or after 1 December 2020, with further guidance to be published late November.
- This is a crucial issue for employers considering implementing redundancies while the furlough scheme is in place and the updated guidance has caused unnecessary confusion – can employers continue to claim for an employee who is serving a contractual notice period between now and 1 December? Will the further guidance be published in time for employers to make difficult decisions about their workforce? Further clarity is needed but this may encourage employers who are considering giving notice of termination due to redundancy, to do so before 1 December (assuming that by that time they have followed a fair process).
- Employers should continue to base statutory redundancy and notice pay on an employee’s “normal wage” rather than furlough wage.
- Employers can continue to claim for periods ending on or before 31 October 2020 until the deadline of 30 November 2020.
- Employers will be able to claim for periods starting on or after 1 November 2020 from 11 November 2020.
Publication of employer claim information
- Rather surprisingly and without much explanation, the new guidance advises that from December 2020, HMRC will publish employer names for companies and LLPs who have made claims under the scheme for the month of December onwards.
As noted above, we await further guidance due late November. Meantime, the priority for employers is to communicate and agree furlough arrangements with staff by Friday 13 November (if a claim will be backdated for 1 November to 13 November) or on the same day on which their furlough period commences.
Contact a member of our Specialist Employment Team if you have any queries about the extension to the furlough scheme or any other employment issue.
This update contains general information only and does not constitute legal or other professional advice.
Caroline Carr, Partner: E: firstname.lastname@example.org / T: 0141 225 5263
Laura Salmond, Partner: E: email@example.com / T: 0141 225 5313
Douglas Strang, Senior Associate: E: firstname.lastname@example.org / T: 0141 225 5271