As part of the Budget on 3 March 2021, the Chancellor announced that the Coronavirus Job Retention (Furlough) Scheme (CJRS), which was expected to end on 30 April 2021, will be extended across the UK until 30 September 2021 (some 19 months after its inception in March last year). The government will continue to fund 80 per cent of the employee’s salary (subject to the cap) for unworked hours until the end of June 2021. This means that employers using the scheme will need to pay wages, NICs and pension contributions for worked hours and NICs and pension contributions only for unworked hours during this time.
From July 2021, employers will need to contribute to furlough pay for unworked hours, starting with a 10 per cent contribution in July and rising to a 20 per cent contribution from August until the Scheme closes at the end of September 2021. The government will contribute 70 per cent and 60 per cent respectively. Employers will also continue to have to pay all NICs and pension contributions for all unworked hours.
Guidance for employers on the CJRS scheme has been updated to reflect the extension and the introduction of employer contributions. In particular, the coronavirus business support guidance on the HMRC website will be helpful for employers, including:
- Claim for your employees’ wages through the Coronavirus Job Retention Scheme;
- Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme; and
- Calculate how much you can claim using the Coronavirus Job Retention Scheme.
The proposed Job Support Scheme (both Open and Closed), has been postponed and may now not go ahead. It is also unclear if the replacement for the Job Retention Bonus that was previously promised, will be put into place.
The names of employers (and, where relevant, their company number) who have made claims under the CJRS are now published by HMRC, along with an indication of the value of the claim within a banded range. The published details only relate to claims made for periods later than 1 December 2020. From February this year, furloughed employees have also been able to see details of claims made for them after 1 December 2020 in their personal tax account.
In this note, you will find details of the scheme rules that will apply from 1 November until the scheme closes at the end of September 2021. For details about the scheme in its previous iterations (much of which will continue to apply to the extended CJRS) please see our insights on the Coronavirus Job Retention Scheme - from March to July 2020 and the Coronavirus Job Retention Scheme – from July to October 2020.
What are the key changes to the scheme?
The CJRS will now run until the end of September 2021 and, until July 2021, will operate in a similar way to the original CJRS in August. Employers had until the deadline on 30 November 2020 to claim for employees on furlough for periods ending on or before 31 October 2020 and it is now no longer possible to submit claims for employees on furlough on or before 31 October 2020. The terms of the extended CJRS now apply with businesses being able to be paid upfront to cover wage costs.
The key points to note are:
- The level of grant under the extended CJRS mirrors levels available to employers under the original CJRS in August until it changes in July 2021. This means that, until July 2021, the government will pay up to 80 per cent of an employee’s normal pay up to a cap of £2,500 and employers will only be responsible for National Insurance Contributions and pension contributions. As with the original CJRS, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they wish.
- The grant will be reduced from 1 July 2021 and employers will be expected to contribute to furlough pay for unworked hours from this time until the end of the Scheme. This contribution is set at 10 per cent for July 2021 but will rise to 20 per cent for August and September 2021.
- To access the extended scheme, neither the employer nor the employee needs to have previously used the CJRS. This is a significant change to the original CJRS, where the vast majority of employees had to have been furloughed for a period of at least three consecutive weeks ending on or before 30 June to enjoy continued access to the scheme through July 2020 to the end of October 2020.
- There is also no maximum number of employees that an employer can claim for from 1 November 2020.
- Current guidance confirms that employers are able to furlough employees who are unable to work because they are clinically extremely vulnerable, or at the highest risk of severe illness from coronavirus and following public health guidance, or who are unable to work because they have caring responsibilities resulting from COVID-19, including employees that need to look after children who are at home as a result of school and childcare facilities closing, or who are caring for a vulnerable individual in their household.
- As per the original CJRS, a new employer is eligible to claim in respect of employees of a previous business transferred if the TUPE or PAYE business succession rules apply and the employees being claimed for have been employed by their prior employer on or before 30 October 2020 and transferred from them to their new employer on or after 1 September 2020.
- Importantly, employers will not be able to claim for employees who are serving contractual or statutory notice for claim periods on or after 1 December. This includes where employees have resigned and also applies where notice was served before 1 December (although claims for notice in the period before 1 December are permitted). This restriction may be problematic for employers who are thinking of re-employing, or have re-employed, people in order to take advantage of the scheme extension. Employers will also need to bear this restriction in mind if redundancies are likely over the coming months.
- The 6th Treasury Direction governing the Scheme makes it clear that any claims for furlough pay in March 2021 and April 2021 should be calculated with reference to the corresponding month in March 2019 or April 2019 (not March 2020 or April 2020) because employees may have already been furloughed in March and April 2020 (see below for calculating usual wages).
- The deadline for submitting claims will be around the 14th of the month (for claims relating to the preceding month). For example, claims relating to March 2021 will need to be made by 14 April 2021.
- The deadline for amending a claim will usually fall on or around the 28th of a month (for claims relating to the preceding month). For example, to amend claims relating to March 2021, the application should be made by 28 April 2021.
Which organisations are able to apply?
All UK employers (including individuals who employ people), which have a UK bank account and: (i) operated a PAYE scheme on or before 30 October 2020; or (ii) for claim periods starting on or after 1 May 2021, operated a PAYE scheme on or before 2 March 2021, are eligible to make a claim, whether their business remains open or closed. The government expects that publicly funded organisations will not use the extended scheme, as was the case for the original CJRS, but partially publicly funded organisations may be eligible where their private revenues have been disrupted. All other eligibility requirements will continue to apply.
HMRC is required to publish information about employers who make claims. This information includes the employer’s name and the amount claimed under the CJRS although HMRC may publish a ‘reasonable indication of the amount claimed’ rather than the exact amount. Information must be published within 3 months from the end of the month for which a claim was made. The information will be taken down 12 months after publication.
Which employees are eligible?
Employers can claim for employees, on any type of employment contract, who were employed and on their PAYE payroll on:
- 30 October 2020 (for periods ending on or before 30 April 2021); or
- 2 March 2021 (for periods starting on or after 1 May 2021).
The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020 (or for claims for periods starting on or after 1 May 2021, this submission must have been made between 20 March 2020 and 2 March 2021), notifying a payment of earnings for that employee. The employees do not need to have been previously furloughed.
For claim periods between 1 November 2020 and 30 April 2021, employees who were employed and on the payroll on 23 September 2020, and who were made redundant or stopped working for their employer afterwards, can be re-employed and claimed for. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees. Similarly, an employee who was on a fixed term contract, on payroll on 23 September, and that contract expired after 23 September can be re-employed and claimed for, provided that the other eligibility criteria are met. However, employers will need to consider very carefully the implications of rehiring an employee, particularly if employees on notice are not eligible for grants under the scheme.
Sponsored employees can also be furloughed. However, it is important to note that from 24 December 2020 their rate of pay cannot be reduced below the minimum rate for their occupation (subject to any discounts they qualified for when they were granted permission), and any reduction must be part of a company-wide policy to avoid redundancies in which all employees are treated the same.
Is flexible furloughing possible?
Flexible furloughing will continue to be possible, in addition to full-time furloughing, so employees will be able to work some of their hours (and be paid for this by their employer) and receive furlough pay for unworked hours.
Calculating usual wages
Calculations determining usual hours and worked hours will broadly follow the same methodology as under the original CJRS. For employees who meet the eligibility criteria under the original CJRS, employers must base the calculation for an employee on the higher of the wages earned in the corresponding calendar period in the 2019/2020 tax year, or the average wages payable in the 2019/2020 tax year. However, with claims in relation to March 2021 and April 2021 the calculation is based on the corresponding month in March 2019 and April 2019 (not March 2020 or April 2020), because employees may have already been furloughed in March and April 2020. The average wages earned in the 2019/2020 tax year should still be used if higher.
For employees who are only eligible for furlough under the extended scheme (for example, employees who started work after 19 March 2020), the calculation is based on the wages earned in the last pay period ending on or before 30 October 2020; or (if their pay varies) the calculation is based on the average wages between the date their employment started or 6 April 2020 (whichever is later), and the day before their furlough begins under the extended CJRS.
The various guidance sets out numerous worked examples to assist employers with these calculations.
As with the original scheme, employees cannot undertake any work for their employer during the hours that the employer records them as being on furlough but they can, as previously, take part in training, volunteer for another employer or organisation or work for another employer (if contractually allowed).
Putting into place agreements retrospectively
The guidance states that employers may put furlough agreements into place retrospectively to have effect from 1 November, but makes it clear that only retrospective agreements put in place up to and including the 13 November 2020 may be relied on for the purposes of a CJRS claim. Written records will need to be kept of the agreement for 5 years and a record of how many hours the employee worked, and the number of hours the employee was not working and on furlough, will need to be kept for 6 years.
Next steps
Employers need to consider their position carefully as difficult decisions around redundancies and restructures may need to be revisited in light of the extension of the furlough scheme. However, given that the future continues to remain uncertain, we appreciate many employers will want to continue to consider various ways in which to reduce workforce costs - to help with this we have two webinars, which you can access here.
In the meantime for as long as you continue to claim under the scheme, keep a record of how you arrived at the amounts you are claiming together with the government guidance upon which you sought to rely, so you are well-prepared in the event that HMRC raises any issues in relation to your claim.
We have been advising many employers on the issues arising out of this scheme as well as advising on redundancy and other programmes of cost-savings. If we can help your organisation, please contact Luke Bowery or any other member of our employment team.
Key links to the current government guidance:
Disclaimer
This briefing gives general information only and is not intended to be an exhaustive statement of the law. Although we have taken care over the information, you should not rely on it as legal advice. We do not accept any liability to anyone who does rely on its content.