After repeated and categorical statements that the Coronavirus Job Retention Scheme (“CJRS”) would come to an end on 31 October 2020, on Saturday the Government made a u-turn and announced an extension of the scheme to operate until December. This news of further support for employees and businesses came with the Prime Minister’s announcement that the UK would be entering a second national lockdown until 2 December 2020 at the earliest.
Yesterday, in a surprise development, the Chancellor announced that the CJRS will be further extended until March 2021, with a review in January 2021. It is hoped that the extension will protect millions of jobs. Whether this will be the case in the longer term is unclear, but the extension of the furlough scheme will undoubtedly provide a short-term lifeline to employers and employees whose businesses may struggle amidst a second lockdown.
What is the percentage contribution and the cap?
The extended furlough scheme, until January 2021 at least, will revert back to the contribution levels which were in place in August: the government will contribute 80% of wages in respect of any unworked (furloughed) hours up to a cap of £2,500 per employee per month, and employers will only need to pay employer National Insurance contributions and pension contributions on the furlough pay. Further, flexible furlough will continue to be an option and it is our understanding that the flexible scheme will remain much the same, with employers paying employees for any hours worked at their normal rate of pay, and the employee receiving furlough pay for any unworked hours.
Who is eligible and what paperwork is required?
In terms of eligibility, employers will be pleased to learn that neither the employer nor the employee need to have made use of the CJRS previously in order to benefit from the extended scheme from 1 November. This opens the door for any businesses which did not previously require assistance who may now find themselves in a more difficult position. In line with the previous CJRS requirements, employers must have a UK bank account and PAYE scheme. Employees claimed for must have been on the payroll by 23:59 30 October 2020 but need not have been furloughed before by their employer. If an employer wishes to furlough a worker for the first time, this must be agreed in writing with the individual. Those that are still furloughed may need to agree to an extension to the agreement currently in place, depending on how that agreement was worded.
Provided that all of the other conditions of the CJRS are met, furlough or flexible furlough agreements may be made retrospectively so as to have effect from 1 November 2020, but only if the relevant furlough agreement is put in place up to and including 13 November 2020.
Therefore, employers will need to act quickly and get their furlough or flexible agreements in place by no later 13 November 2020 if they wish to make a claim under the scheme in respect of any employees from 1 November 2020.
Can I rehire staff that have been made redundant and put them on furlough?
There has been some discussion on this point which has now been clarified by HMRC. Employees who were made redundant or stopped working for their employer after 23 September 2020 can be re-employed and claimed for under the scheme (provided that they, and their employer, meet the other qualifying criteria).
Employers should consider whether re-engaging redundant employees is appropriate for their business and should find the balance between ensuring they have a trained workforce post-pandemic but stay afloat in the short-term. The risks of rehiring include:
The employee cannot work during furloughed hours and doing so would constitute furlough fraud, but the employer would remain liable to pay employer National Insurance contributions and pensions contributions;
If multiple redundancies become necessary once the extended furlough scheme ends, then the collective consultation requirements may be triggered.
What if I had been planning to make redundancies?
The extension of the CJRS until March 2021 is a significant development for businesses which were about to start a redundancy consultation process. Putting staff on furlough rather than making them redundant would clearly be of benefit to employees, but also protects one of the employer’s most important assets – its staff. It could also save money in the long-term as redundancies and recruitment inevitably cost money and take time. Businesses may wish to make use of the extended furlough scheme and then reconsider their position in the new year. Ultimately, there is a balance to be struck between retaining employees and simply delaying the inevitable.
How will the extension of furlough interplay with the Job Support Scheme and Job Retention Bonus?
It is unclear whether the JSS will be utilised post-March, but we do know it is on hold for as long as the furlough scheme is extended. The Chancellor has stated that a retention incentive will be redeployed at an appropriate time, but this will not be in February 2021 as originally planned.
What should employers be doing?
Employer should keep an eye out for further guidance about how the extended CJRS will operate, which is expected on 10 November.
In the meantime, if you’d like more advice, please contact a member of our Employment Law Team.
Our highest priority remains the same: to protect jobs and livelihoods. That’s why we’ve already decided to extend the Job Retention Scheme to December.