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The Coronavirus Job Retention Scheme (‘furlough’) will be extended by five months until the end of March 2021

In our recent update, we looked at the detail of the Coronavirus Job Support Schemes (the JSSO and JSSC) which were expected to come into effect on 1 November 2020.

However, in a last-minute change of approach, the government has announced that these schemes will be put on hold, perhaps permanently.

Instead, the Coronavirus Job  Retention Scheme (‘furlough’) will be extended by five  months until  the end of March 2021, with the stated aim of providing enhanced financial support for business as the COVID landscape and economic outlook continue to worsen.  

This announcement comes a matter of days after the government’s previous statement, on what we all thought would be the final day of the Coronavirus Job Retention Scheme, that furlough would be extended for one month to coincide with the current period of national lockdown.

Detailed guidance on the extended furlough scheme is due to be published on 10 November 2020.

The detail

In an earlier update, published over the summer, we explained the 'wind down’ of the furlough scheme. The government’s opening offer of 80% of employee wage costs was scaled back to 70% in September, and then further to 60% in October.

However, importantly, the extended furlough period will revert to the more generous terms on offer in August; with the government funding up to 80% of employee wage costs, to a maximum of £2,500 per month. National Insurance and pension contributions must be funded by the employer. The government will review the scheme terms in January 2021, and determine at that point whether employer contribution to employee wage costs should increase.

As under current CJRS scheme rules, employers may choose to top up pay to 100% if they wish to do so.

During extended furlough, employers will retain the discretion to either furlough employees full-time, or to use ‘flexible furlough’ to allow employees to work part-time. If using ‘flexible furlough’ employers must, as currently, pay employees in full for the hours they work, and may claim 80% of wage costs for the employee’s unworked hours.

The methodology for working out how much can be claimed will remain broadly the same as under existing CJRS rules. As currently, employers must report and claim for a minimum period of seven consecutive  calendar days.

Which employees are eligible?

To be eligible for the extended furlough scheme, an employee must be on an employer’s PAYE payroll, and an RTI submission notifying payment to that employee made to HMRC, on or before 30 October 2020.

As currently, employees may be engaged on any type of contract, and employers may agree any working arrangements they wish with their employees (with the important ongoing requirement that employees must not work during furloughed hours).

Neither the individual employee, nor their employer, need previously have accessed the CJRS to be eligible for the extended scheme. A slightly different calculation methodology is likely to apply to those employees who are new to furlough.

HMRC has also now clarified that, if employees were on payroll on 23‌ September‌ 2020 (the date the Coronavirus Job Support Scheme was announced) and were made redundant or stopped working for their employer after that date, they can also qualify for extended furlough if they are re-hired by their employer. This is extremely important, as we know many clients carefully planned redundancies to coincide with the end of furlough, and it will now in most cases be too late to retract or amend issued redundancy notices. However, it is important to note that re-hiring remains at the employer’s discretion; there is no legal obligation to take a dismissed employee back. 

In another last minute change, on the eve of national lockdown, the government has reintroduced the concept of ‘shielding’, where individuals who are clinically vulnerable are advised not to attend work if they cannot work from home. The government has confirmed that, as during the Spring lockdown, shielding employees will be eligible for furlough, if appropriate.

Comment

These eleventh-hour announcements of the extension of furlough (two in the space of a week) will no doubt frustrate employers who have made or planned redundancies to coincide with the closure of the scheme, or who have been working hard behind the scenes to transition employees from furlough onto the now apparently defunct Coronavirus Job Support Schemes.

The Coronavirus Job Retention Bonus, a payment of £1,000 per eligible employee intended to incentivise employers to keep staff in continued employment, has also been placed on pause for the time-being. The extension of furlough means that “the policy intent of the JRB no longer applies”.

 The enhanced financial support afforded by the extension of furlough may well, in Chancellor Rishi Sunak’s words, be a ‘vital safety net’ to see many employers, especially SME’s, and those within the worst affected sectors, through the “tough winter ahead”.

While extended furlough is available to all employers, whether open or closed (and is more generous than both the ‘on hold’ JSSO and JSSC), businesses forced to shut during any upcoming lockdown periods will benefit especially from the step-up in funding; from 67% of employee wage costs under the JSSC to 80% under furlough.

You may already have put agreements in place with your employees to end their furlough arrangements at the end of October and move them, as appropriate, onto the Coronavirus Job Support Schemes. Urgent follow-up communications may be needed to explain the change in circumstances, and to seek employee agreement to continue on furlough instead. Hopefully, employees will readily agree to this, as the extension of furlough will mean an increase in pay, compared to either of the Job Support Schemes. It does of course remain important to have the specific terms of any furlough agreement communicated in writing to the employee(s).

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