Exploring the extended furlough scheme
Following an announcement by HM Treasury on 31 October the Coronavirus Job Retention Scheme (CJRS) has been extended. Initially this was just going to be until next month, but it will now be in place until 31 March 2021. On 10 November full guidance was issued on the operation of the extended CJRS so we thought it would be useful to go over the practicalities.
In the meantime HM Treasury published a fourth Treasury Direction on 13 November. This sets out the legal framework for the CJRS and formally extends the CJRS from 1 November 2020 until 31 March, as well as setting out the details of how the scheme will operate.
Do you have to have used the CJRS before?
No, neither the employer nor the employee needs to have previously used the CJRS to use the extended scheme. The extended scheme is available to all employees who were on the employer's PAYE payroll on 30 October 2020 as long as the employer has made a PAYE RTI submission to HMRC between 20 March 2020 and 30 October 2020 notifying a payment of earnings for the employee. It is also available to employees who were made redundant or stopped working on or after 23 September 2020 if they are then rehired, in which case an RTI submission notifying payment in respect of those employees to HMRC must have been made between 20 March and 23 September 2020.
Employers will be able to choose either furlough on a full-time or on a flexible basis. As a brief reminder under flexible furlough employers can bring employees back to work for any amount of time and any shift pattern. While the employer will still be able to claim under the CJRS for those employees' normal hours not worked, it will have to pay in full for any hours worked and will be responsible for the tax and NI contributions on that. When claiming the grant for furloughed hours, employers will need to report and claim for a minimum period of 7 consecutive calendar days.
The Treasury Direction states that it is a condition of making a claim for the claim periods in December 2020 and January 2021 that the employer accepts that HMRC will publish information ("employer information") about CJRS claims on the internet. This will include the name of the employer and a "reasonable indication" of the amount of the claim being made. The Direction states that an exception to the publication of "employer information" may be made for employers who can show that publication would expose their workforce to "serious risk of violence or intimidation".
What are the costs for employers?
The support available under the extended scheme mirrors that which was available under the CJRS in August, so the government will pay 80% of wages up to a cap of £2,500. Employers will pay employer NICs and pension contributions and can top up furloughed pay to 100% if they wish.
This arrangement will remain in place until 31 January. The scheme will be reviewed in January to decide whether employers will be required to make a contribution for the remainder of the scheme.
Can employers still claim for periods of furlough up to 31 October?
Yes they can, provided that this is done by the 30 November deadline. It's worth noting that as these claims will be under the terms of the scheme before it was extended, employers might need to contribute towards the costs of their furloughed employees' wages before the introduction of the extended scheme on 1 November.
Is there any cap on the number of employees who can be furloughed?
When flexible furloughing came in back at the beginning of July the number of employees that an employer could claim for in any one claim period could not exceed the number of employees it claimed for under any claim up to 30 June. For example, if two claims were submitted between 1 March and 30 June, the first for ten furloughed employees, and the second for thirty then from 1 July the maximum number of employees that could be furloughed in a single claim would be thirty (with the one exception of those returning from statutory parental leave). There is now no cap so employers can utilise the scheme for as many employees as they want.
Can those returning from statutory parental leave be furloughed?
Yes, for claim periods starting on or after 1 November it will be possible to furlough employees returning from a period of statutory parental leave in the same way as you would for other employees. The HMRC guidance states that it's possible for an employee to decide, with their employer's agreement, to end their maternity leave early to enable them to be furloughed. If they do this they will need to give at least 8 weeks' notice of their return to work and the employer will not be able to furlough them until the end of the 8 week period.
By way of a reminder, for claim periods ending on or before 31 October employers could furlough an employee returning from statutory parental leave after 10 June, even if they were being furloughed for the first time. This was subject to the proviso that the employer had previously submitted a successful claim for any other employee for a 3 week period of furlough between 1 March and 30 June. The employee returning from parental leave would need to have started their maternity, shared parental, adoption, paternity or parental bereavement leave before 10 June and to have returned from that leave after 10 June. They would also need to have been on the employer's PAYE payroll on or before 19 March 2020.
Putting in place furlough agreements
Any necessary changes to the employment contract as a result of furlough have to be agreed between the employee and the employer. The agreement reached must be made in writing or confirmed in writing by the employer (it can also be done by means of a collective agreement between the employer and a trade union). The HMRC guidance stresses that the employer must make sure that the agreement is consistent with employment, equality and discrimination laws; keep a written record of the agreement for five years; and keep records of how many hours the employee works and the number of hours that they are furloughed. There is no need for the employee to provide a written response.
The guidance states that any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of the CJRS as long as it complies with the conditions discussed above. In other words, those employees who have been furloughed from 1 November, but have not been on furlough previously and have not yet entered into an agreement, can have their agreement backdated to 1 November, but only if this is done by the end of 13 November. It seems from this that if an employer intends to furlough an employee now who has been furloughed before 1 November there is no need to claim by 13 November.
How will a flexible furlough agreement work?
As noted at the beginning of this bulletin, employers will be able to bring employees back to work for any amount of time and any shift pattern, so there is no minimum or maximum limit. Agreed flexible furlough agreements can last for any amount of time, and a flexible furlough agreement can be entered into with an employee more than once.
As there is only a minimum requirement to claim for periods of a week at a time, the employer could enter into new agreements from week to week (for example 5 hours one week, 15 hours the next) provided it is agreed that with the employee. It will be possible to specify the work days or hours according to business needs, but an employer will need to obtain the employee's agreement to this.
While an employee is on furlough they cannot do any work for their employer. However, they can take part in training, volunteer for another employer or organisation, or work for another employer if they are contractually allowed to do so. Employees who are union or non-union representatives will be able to undertake duties and activities for the purpose of individual or collective representation of employees or other workers.
What should flexibly furloughed staff be paid?
Staff working under flexible furlough arrangements will need to be paid whatever they would ordinarily be paid under their contract of employment. The employer will be responsible for paying the tax and NICs on those sums.
The employer will then claim the CJRS grant for the remaining part of the employee's normal working hours when they are furloughed and not carrying out work. The claim will be for a pro rata'd amount of 80% of salary, based on the proportion of hours not worked out of the normal working hours.
There is government guidance on how to work out an employee's normal working hours. Although the amount that the employer receives from the CJRS grant is capped, it is still possible to top up for the furloughed hours if the employer wishes to do so.
When do claims need to be made?
All claims for periods from 1 July 2020 to 31 October 2020 must be submitted no later than 30 November 2020.
For claim periods starting on or after 1 November 2020, employers will be able to claim from 11 November. The guidance states that claims from 1 November must be submitted by 11.59pm 14 calendar days after the month the employer is claiming for. If this time falls on the weekend then claims should be submitted the next working day. For claims in November, the employer will have to submit the claims by 14 December 2020, for claims in December by 14 January 2021 and so on.
The guidance states that HMRC may accept a claim made after the relevant deadline if the employer has a reasonable excuse for failing to make a claim in time and then claimed without delay after the excuse no longer applied. Reasonable excuses will not be considered in advance of a claim deadline.
Can the CJRS grant be used towards pay in lieu of notice or notice pay?
The HMRC guidance states that an employer can continue to claim for a furloughed employee who is serving a contractual or statutory notice period. However, it also makes it clear that grants cannot be used to substitute redundancy payments.
The guidance initially stated that the government was reviewing whether employers should be eligible to claim for employees serving contractual or statutory notice periods. Within a few days of being issued the guidance was amended to state that, for claim periods starting on or after 1 December 2020, an employer cannot claim for any days on or after 1 December during which the employee was serving a contractual or statutory notice period for the employer. So, for the moment it is still possible to claim for contractual or statutory notice periods, but from 1 December employers will not be able to claim for either.
If an employee is made redundant the employer should base statutory redundancy and statutory notice pay on their normal wage and not on their reduced furlough pay. This again suggests that anything above this can be based on less (say 80% pay) subject to this having been agreed with the employee.
What about holiday entitlement?
The guidance makes it clear that for flexibly furloughed employees, any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. Employees should not be placed on furlough for a period just because they are on holiday for that period. Holiday will be paid at the normal rate of pay (where the rate of pay varies the calculation will be on the basis of the average pay received by the employee in the previous 52 working weeks) and not at the furloughed rate so the employer will have to top up pay to 100%, though the employer will be able to restrict when leave can be taken provided there is a business need.
Is it still possible to make employees redundant if they are on furlough or flexible furlough?
It will depend on the reasons for the redundancy. There may be genuine reasons to make redundancies despite the existence of the CJRS. A business, or part of a business, may no longer be viable, even with the CJRS and the ability to flexibly furlough. It may also be the case that a particular business function is no longer needed so the CJRS is only delaying the inevitable.
As a result of this it is likely that employers will be able to dismiss employees for redundancy during furlough, though the fairness of such a dismissal will depend on the circumstances and the employer will have to show that it has considered all alternatives to the redundancy.
The ability of an employer to furlough employees, either fully or flexibly, while the CJRS is in operation may affect the fairness of a dismissal for the purposes of an unfair dismissal claim. If furloughing an employee is not going to cost an employer anything then there's an argument that it should not being making the employee redundant just yet. However, that argument may be harder to run if the scheme changes in January to require employers to make a contribution.
If an employee is made redundant while on furlough a tribunal may be more likely to find that a dismissal was unfair, but it doesn't necessarily follow that it will be.
The extension of the CJRS means that the Job Retention Bonus (a one-off non-taxable payment of £1,000 for employers per employee previously furloughed and still employed by 31 January 2021) has now been withdrawn. The decision to extend the scheme should hopefully mean that businesses have a bit more time to play with now in terms of getting back on their feet.
There are still uncertainties though and, by the end of January, it may well be the case that employers will have to make a contribution to the earnings of those on furlough. There's also the ongoing administrative burden of agreeing each furlough arrangement in writing and ensuring that proper records are kept.
Still, despite all this, employers will undoubtedly be grateful for the extended support in these challenging times. We will keep you up-to-date with any changes to the operation of the scheme.