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Less than a week after the Prime Minister’s announcement that the Coronavirus Job Retention Scheme (‘CJRS’) was to be extended until December 2020, Chancellor Rishi Sunak has unveiled a further extension to the CJRS which will last until 31 March 2021.
This announcement has been accompanied by an HMRC policy paper but, importantly, this paper only applies to claims for the period from 1 November 2020 to 31 January 2021 inclusive. Guidance for CJRS claims from 1 February 2021 onwards will be published following a Government review in January 2021, which will decide whether economic circumstances are sufficiently improved to require an increased contribution from employers.
Note that this HMRC policy paper is not the full guidance, which is expected to be published on 10 November 2020.
CJRS rules 1 November 2020 to 31 January 2021
Employer Eligibility
☑ Must be a UK business, whether open or closed (due to local or national lockdowns).
☑ Must have a UK bank account and PAYE scheme.
☒ NO need to have previously used the CJRS.
☑ Should be a privately funded business (although partially publicly funded organisations may be eligible where their private revenues have been disrupted).
From December 2020, HMRC will publish details of employers who make claims under the extended CJRS.
Employee Eligibility
☒ DOES NOT need to have been previously furloughed.
☑ Must be on employer’s payroll on 30 October 2020.
☑ Their employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, which notifies a payment of earnings for that employee.
☑ Can be employed on any type of contract.
Full / Flexible Furlough
As with the existing CJRS, eligible employers can either fully, or flexibly, furlough eligible employees.
There is no minimum furlough period.
In terms of flexible furlough, employees can work any pattern and there is no minimum hours requirement. Flexible furlough agreements can last for any period of time, and employees can be rotated on and off flexible furlough.
As set out below, however, each claim period needs to be a minimum of 7 consecutive days.
Government and Employer Contributions
The Government will contribute 80% of salary for hours not worked, up to a maximum of £2500 per month. Employers will be responsible for National Insurance Contributions and employer pension contributions. Employers will need to deduct, and pay to HMRC, income tax and employee National Insurance Contributions on the CJRS grant they receive.
At their discretion, employers can ‘top-up’ the Government’s contribution to the employees’ full salaries.
For the hours which employees do work, the employer will be responsible for the employee’s normal wages, as well as NICs and pension contributions, in the normal way.
Calculation of reference pay and usual hours
Previously eligible employees
Those employees who were on an RTI submission on or before 19 March 2020 will be subject to the methodology applied in August 2020 for reference pay and usual hours, even if they have not been previously furloughed prior to 31 October 2020.
‘New’ employees
For new employees (i.e. those hired between 20 March 2020 and 30 October 2020) who were not eligible for the previous CJRS, there is updated methodology, more information about which will be released on 10 November 2020.
What we know at present is that, for ‘new’ employees, 80% of wages must be calculated as follows:
- Fixed salary employees – with reference to the wages payable in the last pay period ending on or before 30 October 2020;
- Variable salary employees – with reference to the average payable between the start date of their employment or 6 April 2020 (whichever is later) and the day before their furlough period begins (these dates are inclusive).
For an employee who is contracted for a fixed number of hours, and whose pay does not vary according to the number of hours they work, ‘usual hours’ will be the contracted hours worked in the last pay period ending on or before 30 October 2020.
For an employee who works variable hours, ‘usual hours’ will be the average hours worked between (these dates are inclusive):
- The start date of the 2020 to 2021 tax year; and
- The day before their furlough period begins.
How to put Furlough into practice
Furlough veterans will be pleased to note that nothing has changed in this respect.
Essentially, given that a furlough arrangement will amount to temporary change to an employee’s terms and conditions, employers must agree the change with the employees, and confirm that agreement in writing to the employees. Where there is a recognised union, agreement must be reached through them.
Record keeping
Employers must keep the written record of the furlough agreement for 5 years. They must also keep records of the number of hours which are worked and not worked by each furloughed employee, for 6 years.
Transition period: restrospective agreement window
The extension of the CJRS has been announced with no warning before its commencement, when businesses had already prepared to use the (now shelved) Job Support Scheme. As a result, the Government has provided that employers can, up to and including 13 November 2020, enter into furlough agreements with employees which are backdated to 1 November 2020.
Furloughing for non-business related reasons
Eligible employees can be furloughed for reasons unrelated to their employer’s financial situation or closure, where they:
- Are shielding in line with the newly updated public health guidance (or need to stay at home with someone who is shielding); or
- Have caring responsibilities which result from COVID-19, including employees who need to look after children.
The extended CJRS is not intended to be used for short-term sickness absences, although this will not affect the furloughing of an employee for business reasons, who just happens to be off sick at the time.
In terms of those employees who are placed on furlough, and then subsequently become ill (due to COVID-19 or otherwise), it is up to the employer whether to move the employees onto Statutory Sick Pay, or keep them on furlough.
The policy paper is silent on the use of furloughing for long-term sickness absence, although it appears to infer that this might be acceptable, given that it has only expressly ruled out short term absence.
Re-employing and furloughing redundant employees
Employees who were on an employer’s payroll on 23 September 2020, but who were subsequently made redundant or stopped working for their employer after this date, can be re-employed and furloughed.
In addition to being on the payroll on 23 September 2020, a PAYE RTI submission to HMRC must have been made from 20 March 2020 to 23 September 2020, notifying a payment of earnings for the employee concerned.
This applies to employees who were employed on fixed term, as well as permanent, contracts.
Employee rights and entitlements on furlough
The rules here are the same as with the previous incarnation of the CJRS.
During furloughed hours, employees are not permitted to carry out any work for their employer, or any linked / associated employer, whether it makes money or provides services.
However, they can take part in training, volunteer for another employer or organisation, or (if they are contractually permitted to do so) work for another employer.
As before, employees will retain their usual entitlements such as annual leave.
How to claim under the extended CJRS
Employers will be able to claim from 8am on Wednesday 11 November 2020. On 10 November 2020, further details will be provided as to how to do this.
Generally, claims can be made in advance (although there is also the option to claim at the point that a payroll is run, or after the payroll has been concluded). However, for the period 1 November 2020 to 11 November 2020, monies will need to be claimed in arrears.
Employers will need to:
- Report and claim for a minimum period of 7 consecutive calendar days.
- Report actual hours worked and the usual hours an employee would be expected to work in a claim period.
The claim period must start and end within the same calendar month. If the pay period includes days in more than one month, each of those claims will need to be calculated separately. Claim periods cannot overlap.
Claims relating to November 2020 must be made by 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month.
Grants payments are anticipated to be received by employers 6 working days after the claim is made.
What is happening to the Job Support Scheme and Job Retention Bonus?
The Job Support Scheme has been postponed for the time being. We will have to wait and see whether it is revived after the closure of the CJRS next March.
The Job Retention Bonus will not be paid in February 2021 as previously envisaged. It may be that an alternative retention incentive will be instigated as and when appropriate.
This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact James Baker or Rachael Lloyd to discuss any issues you are facing.
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