Furlough extension – Everything you need to know
Harrison Drury’s employment team discuss the updates and extensions to the Coronavirus Job Retention Scheme.
On 5 November, the chancellor Rishi Sunak extended the Coronavirus Job Retention Scheme (CJRS) meaning workers across the United Kingdom will benefit from increased support with a five-month extension of the furlough scheme into Spring 2021.
The Treasury has now published guidance for the furlough extension, confirming the scheme will operate similarly to how it did between March and October this year.
Below is a summary on how the scheme will operate:
- The CJRS will run until the end of March 2021, with a review point in January 2021.
- Employees on furlough will receive 80% of their salary, which will be paid by the state with a cap at £2,500 per month. Although employers will not need to contribute to employee’s wages, they will however, need to make contributions toward pension and national insurance contributions.
- The scheme is open to all employers across the UK, regardless of lockdown rules in each nation and crucially any employer can use the scheme. A very important development is that employees do not need to have been furloughed before to take part which, in essence, means any employee can now be furloughed.
Employees returning from maternity leave need to give statutory eight weeks’ notice to end maternity leave early in order to be furloughed. However, further guidance is expected on whether the employee and employer can agree to shorten the eight-week period.
To be eligible for the scheme, employees must be on the employer’s PAYE payroll on 30 October 2020, as long as they have made a PAYE RTI Submission to HMRC between 30 March 2020 and 30 October 2020. If an employee was made redundant or left after 23 September 2020, they can be rehired and furloughed. Employees who TUPE into a business must 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.
As was the case under the previous flexible furlough rules, employees will be able to work part-time while on furlough. The employer will need to cover the employee’s wages at the normal rate for any hours they do work. However, an employee must not be allowed to work during their furloughed hours. This includes any normal work obligations and anything beyond their usual remit.
HMRC has already confirmed that from December 2020, they will publish employer names for companies and LLPs and the company registration number of those who have made claims. These measures have been put in place to prevent any breaches of the CJRS.
Some of the other features of the extended furlough scheme include:
- Employees who have been furloughed, can work for another employer or volunteer elsewhere, providing their contract allows this.
- As with the CJRS scheme earlier this year, employers can furlough employees on zero-hour contracts and fixed term contracts as well as agency workers.
- Importantly, employers can agree to furlough someone retrospectively with effect from 1 November 2020, providing an agreement to retrospectively claim furlough occurs on or before this Friday 13 November 2020.
The government is currently reviewing whether employers should be eligible to claim under the CJRS for employees serving contractual or statutory notice periods, and will change their approach for claim periods starting on or after 1 December 2020. In essence, this means if you are considering dismissing an employee, for redundancy or otherwise, you must ensure notice is given before 1 December 2020.
If you are considering furloughing any employee, this must be confirmed in writing and kept as a written record for five years.
In addition to the CJRS extension, the government has also announced the following:
- Cash grants of up to £3,000 per month for businesses which are closed;
- £1.1 billion will be given to Local Authorities, distributed on the basis of £20 per head, for one-off payments to enable them to support businesses more broadly;
- Plans to extend existing government-backed loan schemed and the Future Fund to the end of January, and an ability to top-up Bounce Back Loans; and
- An extension to the mortgage payment holiday for homeowners.
As highlighted above, it is important to comply with the requirement to agree furlough arrangements with employees in writing, which must be kept for five years for HMRC purposes.
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