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Advice

The Coronavirus Job Retention Scheme (CJRS) has proved to be a bit of a moveable feast, evolving to keep pace with the ever-changing COVID situation.

The government’s announcement at the end of last week, that the furlough scheme will be extended yet further until 30 April 2021, was therefore unexpected, but not a shock. UK employers have learned to live with uncertainty, and to adapt with agility, over the last, turbulent year.

Furlough extension

In November, when announcing the extension of furlough to 31 March 2021, the Government committed to reviewing the terms of the scheme in January 2021. However, this review was brought forward in order to “enable businesses to plan with certainty into the New Year”.

The outcome of the review, to allow employers an extra month’s access to support at current levels, has broadly coincided with the review of tiered restrictions, including large areas of the UK moving up tier levels and, in England, the creation of a new, more stringent Tier 4 covering London and the South East. The whole of mainland Scotland is moving to Tier 4 on Boxing Day.

The terms of the furlough scheme will remain the same up to the end of April 2021. The government will continue to pay 80% of furloughed employees’ salaries for hours not worked. As currently, employers will be required to pay wages, NICs, and pension contributions for any hours the employee has worked, and must fund NICs and pension contributions for any hours the employee does not work.

Clearly mindful of feedback that announcement of the November furlough extension came too late to prevent redundancies and protect jobs, the government has promised that next year’s budget, announcing the next phase of support, will take place on 3 March 2021, 58 days in advance of the new scheme end-date. This will allow businesses to plan for a 45-day minimum redundancy consultation period, if necessary, before financial support is changed or withdrawn.

Christmas furlough

In other news, a small but potentially significant amendment has been made to the government’s furlough guidance.

The guidance has long made clear that furlough should not be used simply to cover an employee’s usual annual leave. However, these general remarks have been amended to specifically state that businesses should not place employees on furlough “just because” they “usually do less business over the festive period”, unless COVID 19 has had a demonstrable impact on operations.

It appears that the government are keen to guard against employer attempts to use the scheme to subsidise a ‘normal’, foreseeable period of reduced productivity that is not specifically related to COVID. There is therefore a heightened risk that employers placing employees on furlough for the first time over Christmas, or returning employees to furlough over Christmas after a significant break, may be scrutinised by HMRC. It is important to be fully prepared to explain and defend use of the scheme over Christmas in the event of a retrospective audit.

Festive bank holidays

To avoid confusion further down the line, it is also worth refreshing memories about how festive bank holidays should be treated under the furlough scheme.

If the furloughed worker would usually have worked the bank holiday, then furlough will be unaffected, and the bank holiday should be treated as a ‘normal’ furloughed day.

However, if the furloughed worker would usually take the bank holiday as annual leave, employers have two main options. Firstly, the bank holiday may be treated as annual leave taken during the furlough period, which means that the employer will be required to top up pay to 100% (even if the employee has agreed to drop down to 80% during furlough).

Alternatively, the bank holiday can be deferred until the employee’s return to work. This may simplify the calculation of furloughed employees’ pay over Christmas and achieve savings in the short term. However, this approach will mean that employees will have these accrued leave days to take on return to work, perhaps in addition to other annual leave accrued during furlough, when operations pick up again and you most need ‘all hands on deck’.

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