The Coronavirus Job Retention Scheme is designed to help businesses avoid having to lay off staff temporarily, or make employees redundant, in the face of the unprecedented disruption caused by COVID-19.
All businesses, regardless of size or sector, with a PAYE scheme in place on or before 19 March 2020, that have enrolled for PAYE online and have a United Kingdom bank account, can benefit from the scheme. Under the scheme, the Government will reimburse employers up to 80% of their employees’ wages (up to a maximum of £2,500 per month, providing the employee was employed on or before 19 March 2020 and real time information had been submitted
to HMRC prior to this date) plus the corresponding employer’s National Insurance contributions and employer’s auto-enrolment pension contributions.
The scheme, originally set to run from 1 March 2020 until 31 May 2020, but subsequently extended to 30 June 2020, has just been further extended until the end of October 2020.
Employer and employee obligations
In order for employers to qualify for payment under the scheme, they must designate affected employees as “furloughed workers” and place them on furlough for a minimum of three consecutive weeks. Employee consent to this change of status and the cessation of all work for the employer must be obtained in writing and retained on file for five years by the employer. If employers wish to reduce furloughed workers’ salaries in line with the amount they can reclaim from HMRC (i.e. 80% of the employee’s wages up to a maximum of £2500 per month), consent must also be obtained for this change of the terms of employment.
If employees do not consent, employers may be required to consider less favourable alternatives, such as lay-offs or potential redundancies, in which case, employers are advised to seek legal advice. Furloughed workers must not earn money or perform any services, even the smallest task, for their immediate employer or any associated organisation while furloughed. To do so would jeopardise the validity of their employer’s claim. Saying that, furloughed workers are entitled to volunteer or undertake training, providing neither activity generates income for their employer. Quite unexpectedly, furloughed workers can also start work with another employer during their period on furlough, although this will only be permitted if they are contractually allowed or otherwise get permission from their employer to do so.
Eligibility criteria
For an employee to be eligible for furlough under the scheme, they must be on the employer’s PAYE payroll on or before 19 March 2020 and HMRC must have receive an RTI submission in respect of the employee on or before this date. As always, there are a few exceptions to this general rule in relation to TUPE, payroll consolidation, maternity and other types of family leave, and redundancies. It is also worth noting that there are a few expansions, meaning certain individuals who are not employees are also eligible for Furlough. Please seek advice separately on any these if you believe they apply to you.
Payments
Employers will be able to receive the grants in respect for Furloughed Workers under the Scheme through a portal set up by HMRC which went live on Monday, 20 April 2020, enabling the first payments to
employers to start at the end of April 2020. Employers will need a range of information in order to submit their claims through the portal including, but not limited to, each employee’s name, their National Insurance Number, the claim period in respect of each employee and the amount being claimed for each employee. It is vital that employers
keep the data used to calculate the value of their claims under the Scheme in case these are needed as evidence in the future. Employers must continue to pay their employees as usual during furlough (taking
into account any agreed reductions in salary).
Changes to the scheme
As promised, Chancellor, Rishi Sunak, has now provided details as to how the revised Coronavirus Job Retention Scheme will be implemented. These changes were announced on Friday, 29 May 2020.
June 2020
To facilitate the amendments to the scheme, as documented below, the Government has confirmed that the scheme will close to new entrants from the end of June (i.e. Tuesday, 30 June 2020). Therefore,
for employees to be furloughed for at least the 3-week minimum, thus permitting their employer to make a claim under the scheme, employees must be furloughed for the first time by Wednesday, 10 June 2020 at the absolute latest. From 1 July 2020 onwards, the scheme will be restricted to employers currently using the scheme and previously furloughed employees. Please bear in mind this 10 June 2020 deadline.
July 2020
Whilst it was initially thought the scheme would remain in its current form until the end of July 2020, we now have confirmation that from 1 July 2020, businesses will be afforded the flexibility to allow furloughed workers back to work part-time. This transition occurring earlier than originally forecast is likely to be an attempt to support the Government’s plans for a phased return back into the workplace, which are already in operation. It will be up to employers to work out the specific days and hours employees will work upon their return so that
these can be adapted to suit their individual businesses. When claiming from 1 July 2020, e.g. once part-time furlough Leave is permitted, employees will only be able to claim for the hours an
employee remains on furlough. Employers will be responsible for paying employees in full for the hours they undertake work. Employers will need to make the claim for a minimum period of one week to allow
for the grant to be accurately calculated across working patterns. It is thought that employers will be required to submit data confirming the usual hours an employee would be expected to work in the claim
period, and the actual hours worked in such a period.
The grant employers are entitled to claim back from the Government (i.e. 80% of wages, up to a maximum of £2,500 per month) will remain the same for July.
August 2020
From August, the level of financial support from the Government under the scheme will be slowly tapered out, reflecting the fact that businesses will hopefully be starting to be on the rise and gain some sort of financial stability with employees having been able to work part-time throughout July. The idea is to gradually reduce the level of support from the Government so as to not impact too heavily on
businesses. Whilst the Government will continue to pay 80% of wages, up to a maximum of £2,500 per month, from 1 August 2020, employers will be responsible for Employer National Insurance Contributions and employers pension contributions. Government guidance has confirmed that for the average claim, this will represent approximately 5% of the gross employment costs the employer would normally be liable to pay had they not been given the opportunity to furlough the employee.
September 2020
Only from September will the actual value of the grant employers can claim for furloughed employees (i.e. 80% of wages, up to a maximum of £2,500 per month) start to be diminished. From 1 September 2020, the Government will reduce the grant so as to pay 70% of wages, up to a maximum of £2,187.50 per month. This means that employers will not only be responsible for Employer National Insurance Contributions and employer pension contributions, but also 10% of wages – it is important that the employee continues to receive at least 80% of wages
(up to the original maximum of £2,500 per month) throughout the whole period the Scheme is in force. Of course, employers will still have the prerogative to “top-up” the amount available from the Government
if they so wish (although often limited by their financial position). Government guidance has confirmed that for the average claim, this will represent approximately 14% of the gross employment costs the employer would normally be liable to pay had they not been given the opportunity to Furlough the employee.
October 2020
Further measures will be taken in October to once again minimise the available grant from the Government. From 1 October 2020, employers
will be able to claim 60% of wages, up to a maximum of £1,875. Therefore, employers will be responsible for 20% of wages, alongside Employer National Insurance Contributions and employers pension
contributions, to make sure employees continue to receive at least 80% of wages (up to the maximum of £2,500 per month). Again, employers are able to “top-up” furloughed employees’ salaries. Government guidance has confirmed that for the average claim, this will represent approximately 23% of the gross employment costs the employer would
normally be liable to pay, had they not been given the opportunity to furlough the employee.
The scheme will draw to a close on 31 October 2020.
It is important for employers to bear in mind that if they wish to extend an employee’s period of furlough beyond the date originally anticipated (and agreed), or if they are intending to bring an employee back to work, but only on a part-time basis, normal employment law rules will still apply. Therefore, any changes to an employee’s terms and conditions of employment, however temporary, will require employee consent.
