Here’s what you need to know about the extension of the furlough scheme.
On 31 October 2020, the same day as the Coronavirus Job Retention Scheme (CJRS) was due to come to an end, the Government announced a second national lockdown. With that came the extension of the CJRS (through which so many employees have been furloughed since March 2020). This pushed back the proposed implementation of the Job Support Scheme (see our article here).
On 5 November 2020 the Chancellor announced that the Coronavirus Job Retention Scheme (CJRS) would remain open until 31 March 2021 for which full guidance was published on 10 November (and updated on 12 and 13 November 2020) and can be viewed here.
We then first saw an extension of the CJRS until to the end of April 2021 and finally (perhaps), in the Budget in March, to the end of September 2021.
Fifth, Sixth and Seventh Treasury Directions were issued on 12 November 2020, 25 January 2021 and 15 April 2021 setting out the full legal rules for the scheme.
Note that as of the Fourth Treasury Direction, published on 16 November 2020, HMRC are publishing information about employers who claim under the scheme. The information being published will be the employer’s name and (if applicable) company reference number and the amount of the claim.
Furlough going forward
Government Contribution
The Government’s contribution under the CJRS has, as of 1 July 2021, dropped to 70% though the total amount covered by the scheme remains 80% of an employee’s current wages for hours not worked, up to a limit of £2,500 per month (the eligibility criteria having been left unchanged). A helpful table and more detail regarding contributions can be found here.
Calculation of Pay
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 March 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.
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.
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; and
- 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.
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; and
- 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 2021.
Note that the scheme now operates with a calendar lookback approach which varies depending on the period you are claiming for so do check this on the Government website here.
Wage Top-Ups
Employers can still top up the employee’s wages above the scheme at their own expense, if they wish to. There remains no obligation to do so.
Employer Responsibility
Employers will remain responsible for paying the wages in full of any hours worked by the employee (including NICs and work pension contributions). For hours not worked:
- July: 10% payable by employers for hours not worked plus NICs and pension contributions; and
- August and September: 20% payable by employers for hours not worked plus NICs and pension contributions.
Holiday Pay
Furloughed employees continue to accrue leave as per their employment contract and can still take holiday in the same way. Holiday accrual can varied upon agreement between the employer and employee, but must not be less than the statutory annual entitlement (5.6 weeks).
If a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations. More information about furlough and annual leave can be found here.
Types of Furlough
There is no minimum furlough period. Full-time and flexible furloughing continue to be allowed under the extended scheme. There is no requirement for any hours to be worked and full-time furlough is permitted. A record of the hours worked/furloughed must be kept for six years.
Under flexible furlough, employers will need to pay employees in full as usual for any hours worked (which pay must be at least statutory National Minimum Wage).
Work During Furlough
Whilst furloughed, employees cannot do any work which makes money or provides services for their employer or any associated organisation. Employees can take part in training and volunteer or work for another employer or organisation (if permitted by their contracts).
Employment Rights During Furlough
Furloughed employees retain their employment rights in relation to SSP, annual leave, maternity and other parental leave and unfair dismissal.
Employee Agreement
Decisions as to who to furlough must be made in accordance with usual employment, equality and discrimination laws. The employer must confirm the furlough arrangements in writing and whilst the scheme does not require employees to provide a written response, we would strongly advise this to record agreement to a contractual variation. Employers must keep a written record of the agreement for five years.
Furlough Claims
Claims will need to be made for minimum periods of seven consecutive calendar days.
Eligibility for Furlough*
There will be no gap in eligibility for support between the previous end-date and the extension of the scheme.
No requirement for previous furlough
The scheme is open to employers who have not previously made a claim under the CJRS and for employees who have not previously been furloughed.
Qualifying dates of employment
The CJRS can now be used to claim for employees on your payroll as at 2 March 2021. Note that the scheme requires that an RTI submission must have been made for such employees between the dates of 20 March 2020 and 2 March 2021.
Working pattern
Employers can use the scheme to claim for employees on any amount of time or shift pattern and the employee can be on any type of employment contract.
Shielding employees and caring responsibilities
Employees who are unable to work if, following public health guidance, they are clinically extremely vulnerable or at the highest risk of severe illness from coronavirus and following public health guidance or who have caring responsibilities resulting from Coronavirus (including childcare) can be furloughed.
Sick employees
An employee on sick leave can be furloughed, at the employer’s option and provided there is a business reason for placing the employee on furlough. If they are not furloughed, they must still be paid at least Statutory Sick Pay (SSP). SSP and CJRS rebates can be claimed for the same employee, but not for the same period of time.
Re-employment
Employees who were employed and on the payroll on 23 September 2020 who were subsequently made redundant or whose fixed-term contract expired or who stopped working for their employer can be re-employed and claimed for under the CJRS (provided the other eligibility requirements are satisfied).
TUPE or change in ownership
The latest iteration of the CJRS confirms that claims can still be made in relation to employees who have transferred to your employment under TUPE or the PAYE business succession rule, provided that the transferred employee was employed by their prior employer on or before 2 March 2021, transferred to their new employer on or after 1 January 2021 and was included on an RTI submission by their old employer between 20 March 2020 and 2 March 2021.
Maternity leave
Employees currently on maternity leave can be furloughed but will need to give notice to end their maternity leave early. Employees are required to give eight weeks’ notice to return early from maternity leave but an employer and employee can agree a shorter notice period. The Government guidance appears to permit that short notice can still be agreed. The employee can only be put on furlough at the end of the eight weeks or on the agreed return to work date. The guidance is not entirely clear if the date to be used here is the earlier of these two dates but as short notice seems to be permitted, our view at this stage is that such employees can be furloughed from the earlier date.
* Eligibility for the extended CJRS remains unchanged notwithstanding the various extensions of the CJRS.
Redundancy
Redundancies should still be made in accordance with the normal rules, including as regards selection, consultation (including collective consultation) and notice periods. Statutory redundancy and notice pay should be based on the employee’s normal wage, not the furloughed wage.
Grants cannot be used to substitute redundancy payments.
You cannot claim for any days on or after 1 December 2020 during which a furloughed employee is serving notice. This applies to both contractual and statutory notice periods and not just to redundancy situations but also if an employee has resigned or retired.
What next?
The portal for making claims is now open.
If you would like to find more about the process of making a claim under the CJRS, including what you’ll need and how to claim, the full guidance can be found here. Similarly, if you would like more information regarding reporting the payments, that can be found here.
The Job Retention Bonus, which had been going to pay out in February 2021 to keep people in work until the end of January 2021, will now not come into effect.
If you would like to read our previous guidance on the CJRS, you can find that here. Alternatively, you can also check the Gov.uk website, which is being regularly updated.
We continue to advise many organisations on the various employment and HR considerations being faced at this time and please do get in touch if you would like any assistance.