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Furlough scheme extended to March 2021

As Chancellor Rishi Sunak announces that the Coronavirus Job Retention Scheme will now remain open until 31 March 2021, we look at the details.

Rishi Sunak Job Retention Scheme extension official word graphic.

Despite having taken the line only a few weeks ago that the furlough scheme had to end on 31 October, following the imposition of lockdown 2, the Chancellor, Rishi Sunak has announced that it will now remain open until 31 March 2021.

The original terms have also been reintroduced, meaning that employers can claim up to 80% of salary for hours not worked, up to £2,500 per month if an employee is fully furloughed.  The reduced rates applicable in September and October have been put aside for now – but note that from 1 February, the rates may be reviewed for the last couple of months to 31 March.

Needless to say, full guidance has yet to be published – it’s expected on 10 November.

For now, we know that:

  • Employers need not have used the CJRS previously to use it now.
  • Employers across the UK can claim, whether their business is open or closed.
  • Employers can claim for employees who were employed and on the PAYE payroll on 30 October 2020, and regarding whom a PAYE RTI submission was made to HMRC between 20 March 2020 (the previously applicable RTI date) and 30 October 2020.
  • Employers can fully furlough employees, or use the previously existing flexible furlough scheme, so there is total flexibility to have employees on furlough or working on any pattern.
  • For employees who were furloughed under the previous incarnation of the CJRS, employers should continue to use the same calculations for reference pay and usual hours.
  • However, for employees not previously furloughed, there are different calculations of reference pay and usual hours – so this is something to watch out for.
  • As mentioned above, the same contributions by employers apply as for August 2020 – meaning that for hours not worked, employers only have to cover NI contributions (NICs) and employer pension contributions.
  • Employers must pay the employee’s salary for hours worked, as normal, along with NICs and employer pension contributions.
  • Employers can re-employ employees who were on payroll on 23 September but who since stopped working for the employer, and put on furlough – including any employees made redundant. The same RTI criteria apply.
  • Employees can’t undertake work for the employer whilst on furlough, or during furloughed hours whilst on flexible furlough, although as before they can undergo training or volunteer elsewhere. Subject to their contract, employees may be able to work elsewhere while furloughed.
  • In terms of other coronavirus job schemes:
    • the Job Retention Bonus payment has been postponed from February 2021 – we are only told that ‘a retention incentive will be deployed at the appropriate time’; and
    • the launch of the Job Support Scheme has been postponed.

(New) Furlough Agreement Required

Employers must have confirmed to the employee in writing that they have been furloughed/flexibly furloughed, to be eligible for the grant.  It is advisable to set out the terms of the (new) furlough in an agreement between the employer and employee, including any amendments to the normal terms – such as an acceptance by the employee that they will receive only furlough pay up to 80% or £2,500 rather than full pay – in order to ensure that both parties are fully aware of the hours to be worked/on furlough, pay entitlements (and how much will be covered by the CJRS grant), and any other changes applicable during furlough.

That agreement must be consistent with employment, equality and discrimination laws, and must be retained for five years.  The agreement must ‘reflect the hours the employee has actually worked/not worked over the period covered by the agreement’ – in other words, it must presumably be an accurate reflection of reality.  The agreement must also ‘allow the employer to satisfy the terms of the CJRS so they can make a claim in relation to hours not worked’.  Records must be kept of the hours worked by each furloughed employee, and their furloughed hours, for six years.

Deadline for retrospective furlough agreements – 13 November 2020

Notably, although furlough agreements put in place retrospectively but have effect from 1 November are valid for the purposes of a CJRS claim (provided the agreement complies with the conditions above), only agreements put in place up to and including 13 November may be relied on for the purposes of a CJRS claim.

The upshot is, therefore, that to be able to claim the grant under the furlough scheme, employers must have put a compliant furlough agreement in place before or on 13 November at the latest.  Otherwise, presumably, they will only be able to claim the grant in respect of the actual start date of the furlough agreement.

If you have any queries regarding the CJRS furlough scheme, how to unravel redundancies already made, or any other employment issues, please contact Clare Chappell or speak to our employment team.

This article was written by Clare Chappell

Please note the contents contained in this article are for general guidance only. Legal advice should be sought before taking action in relation to specific matters.

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