It’s over a year since Rishi Sunak announced the introduction of the Coronavirus Job Retention Scheme (CJRS) and in doing so, forced employers and employment lawyers alike to get to grips with the concept of furlough.
Few of us probably anticipated that the furlough scheme would still be running a year later. The Budget announcement in March saw the latest in a series of extensions to the scheme. Although most aspects of the scheme remained as they were (which you can read the detail of in our article here), there are some key pointers to have in mind.
What are the key furlough dates?
The CJRS will now run until 30 September 2021.
For periods ending on or before 30 April 2021, the scheme can be used to make claims for employees who were employed on 30 October 2020 (and for whom an RTI submission had been made to HMRC between 20 March 2020 and 30 October 2020).
For periods starting on or after 1 May 2021, the scheme can be used to make claims for employees who were employed on 2 March 2021 (and for whom an RTI submission had been made to HMRC between 20 March 2020 and 2 March 2021).
Does an employer need to have claimed previously?
No. You do not need to have previously claimed for an employee before 30 October 2020 to claim for periods from 1 November 2020 and you do not need to have previously claimed for an employee before 2 March 2021 to claim for periods from 1 May 2021.
What contributions do employers have to make?
At present, employers are only required to pay pension contributions and NICs for furloughed workers (as well as paying in full for any hours worked on a flexible furlough basis). That will remain the case through to the end of June. From July, employers will be required to make contributions to pay for furloughed workers:
- July: employers will need to pay 10% of furloughed hours as well as pension contributions and NICs
- August and September: employers will need to pay 20% of furloughed hours as well as pension contributions and NICs
Throughout the period until the end of September, the scheme will cover up to 80% of wages for hours not worked, up to a limit of £2,500 per month.
Employers remain permitted to top their employees’ wages up above the 80%/£2,500 cap if they wish to do so.
How do employers calculate pay and hours?
There is detailed guidance from the Government here about calculating the amounts that can be claimed but we have summarised the key information here.
You will first need to work out your employee’s reference date.
This will be 19 March 2020 if:
- The employee was on your payroll on 19 March 2020 (i.e. for whom a real-time information (RTI) submission was made on or before 19 March 2020); or
- You made a valid furlough claim for the employee for a period ending on or before 31 October 2020; or
- The employee was on a previous employer’s payroll on 28 February 2020 and transferred to you after that date under the TUPE transfer rules.
The reference date will be 30 October 2020 if:
- The employee joined your payroll between 20 Marchc 2020 and 30 October 2020 (with an RTI submission made during that period); or
- You made a valid furlough claim for the employee for a period between 1 November 2020 to 30 April 2021; or
- The employee was on a previous employer’s payroll on or before 30 October 2020 and transferred to you after 31 August 2020 under the TUPE transfer rules.
Where neither the 19 March 2020 nor 30 October 2020 reference dates apply, such individuals cannot be furloughed for periods prior to 1 May 2021.
However, if an employee joined your payroll from 31 October 2020 and an RTI submission was made for them between 31 October 2020 and 2 March 2021 (inclusive), they can be furloughed for periods starting on or after 1 May 2021 and their reference date will be 2 March 2021.
Employees with fixed pay
For employees with fixed pay, you will calculate the 80% based on the wages payable to them in the last pay period ending on or before their reference date. Note that if a fixed pay employee has worked overtime, it may be necessary to use the method for a variable pay employee. There is further guidance on this on the Government website.
Employees whose pay varies
For employees whose pay varies, the approach varies slightly depending on the reference date:
- Reference date of 19 March 2020: calculate 80% of the higher of the wages earned in the corresponding calendar period in a previous year or average wages payable in the tax year 2019/2020
- Reference date of 30 October 2020: calculate 80% of the average wages payable between the start date of their employment or 6 April 2020 (whichever is later) and the day before their furlough period begins on or after 1 November 2020
- Reference date of 2 March 2021: calculate 80% of the average wages payable between the start date of their employment or 6 April 2020 (whichever is later) and the day before their furlough period begins on or after 1 May 2021.
Calculating the hours
Employees’ hours will also need to be calculated according to the employee’s reference date. For employees whose hours don’t vary, you will be looking at the last pay period prior to the reference date. For employees whose hours do vary, the approach is again different depending on the reference date:
- Reference date of 19 March 2020: usual hours are based on the higher of the average hours worked in the tax year 2019/2020 or hours worked in the corresponding calendar period in a previous year
- Reference date of 30 October 2020: usual hours are based on the average number of hours worked in the period they worked for you from 6 April 2020 up to and including the day before their furlough period begins on or after 1 November 2020
- Reference date of 2 March 2021: usual hours are based on the average number of hours worked in the period they worked for you from 6 April 2020 up to and including the day before their furlough period begins on or after 1 May 2021Note that the scheme now operates with a calendar look-back approach which varies depending on the period you are claiming for so do check this on the Government website.
Does the scheme cover all kinds of employees?
Yes. It remains the case that you can claim for employees on any type of employment contract and that employees can be fully furloughed or any variant of flexible furlough (provided such arrangements are agreed and appropriately documented). There remains no minimum furlough period (although claims must be for minimum seven day periods).
Can employers claim for notice periods?
In line with the change brought in in December 2020, you cannot claim from the CJRS for any days on or after 1 December 2020 during which a furloughed employee is serving a contractual or statutory notice period. This includes employees who have resigned or retired.
What about employees who can’t work because they are clinically extremely vulnerable or for caring reasons?
As under the last extension, an employee who is 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 because of caring responsibilities resulting from coronavirus can be furloughed.
Do remember that HMRC are now publishing details of claims made under the CJRS on gov.uk. This information will be published monthly.
Current predictions
At the current time, it still appears that this will be the final extension of the CJRS but economists are already predicting that the UK’s recovery will be adversely impacted by the closure of the scheme.
21 June, so-called ‘Freedom Day’, has come and gone with restrictions still in place but the Prime Minister has been clear that he sees the revised date of 19 July as being the end of lockdown restrictions. If there are still restrictions around social distancing, that will have an ongoing impact for the way businesses operate, but is the extension to September an indication that Government are expecting (or hoping) that those measures will have been further relaxed by then?
The extension and the tapering of contributions are certainly intended to avoid a cliff-edge on the furlough scheme ending but it is still very likely that there are jobs being sustained by the CJRS which in reality no longer exist. Unemployment figures continue to drop but may still rise again, albeit that these extra months of furlough may at least mean that it does so more gradually.
Those individuals who have been furloughed for 15 months now and may be for another three will face their own challenges as and when they do get back into the workplace. The effects of the pandemic will be felt for some time to come.