The Chancellor today (29 May 2020) announced more details about the forthcoming changes to the Coronavirus Job Retention Scheme (the Scheme). Below, we highlight the key implications of the changes for employers.
The Scheme was introduced in March 2020 and is designed to help all UK businesses who cannot maintain their current workforce because their operations have been severely affected by coronavirus. It was originally intended to run until the end of May 2020, but was extended – first to the end of June and then to the end of October 2020.
Under the Scheme, employers retain their employees on a form of authorised leave (furlough), with the Government funding a significant proportion of their pay (currently 80% of normal monthly wage costs, up to £2,500 per month, plus the associated employer National Insurance Contributions (NICs) and minimum automatic enrolment employer pension contributions on that subsidised furlough pay). However, furloughed employees are currently not allowed to perform any work for their employer during furlough and this lack of flexibility has made it difficult for businesses to get back up and running.
Following lobbying by Make UK and other business groups, the Government announced on 12 May that greater flexibility would be introduced to the Scheme and today’s announcement provides further information on how this will operate.
From 1 July 2020, businesses will be given the flexibility to bring furloughed employees back part time. It is worth highlighting that this flexibility is being introduced a month earlier than anticipated, as the original announcement had suggested it would only come into effect in August. Employers will be able to decide the hours and shift patterns their employees will work on their return (although any contractual changes will need to be agreed and confirmed in writing). This should enable them to bring the workforce back in a staggered way while continuing to receive financial support under the Scheme. However, employers will be responsible for paying employees’ wages while they are in work, i.e. claims under the Scheme will only cover the hours for which furloughed employees are not working. When they make their claim, employers will be required to submit data on the usual hours a furloughed employee would be expected to work in a claim period and actual hours worked. When claiming for furloughed hours, employers will need to report and claim for a minimum period of a week at a time, in order for grants to be calculated accurately across employees’ working patterns. This is a minimum period and employers will be able to make claims for longer periods, e.g. if their employees are on monthly or two weekly cycles.
Note that claims from July onwards will be restricted to employers who are currently using the Scheme and previously furloughed employees. The Scheme will close to new entrants on 30 June, which means that the final date by which an employer can furlough an employee for the first time will be 10 June, in order for the current minimum three-week furlough period to be completed by 30 June. Employers will have until 31 July to make any claims in respect of the period to 30 June. The Government says that this restriction is necessary to enable the introduction of part time furloughing and support those already furloughed back to work.
The amount that employers can claim under the Scheme will remain the same during June and July (although if bringing employees back part-time in July, only non-working hours will be covered). From 1 August 2020, the level of Government grant will be slowly tapered, but employees will continue to receive 80% of their normal pay (subject to a monthly cap of £2,500) covering the time they are unable to work.
During August, employers will be able to claim 80% of furloughed employees’ wages up to a monthly cap of £2,500 under the Scheme. However, employers will no longer be able to claim for employer NICs or pension contributions under the Scheme and will have to fund these themselves.
During September, employers will be able to claim 70% of furloughed employees’ wages up to a monthly cap of £2,190 under the Scheme. As well as employer NICs and pension contributions, employers will have to fund 10% of the normal wages received by furloughed employees, so that the employees continue to receive 80% of their pay, up to the monthly cap of £2,500.
During October, employers will be able to claim 60% of furloughed employees’ wages up to a monthly cap of £1,875 under the Scheme. As well as employer NICs and pension contributions, employers will have to fund 20% of the normal wages received by furloughed employees, to make up the 80% total to which the employees are entitled subject to the monthly cap of £2,500.
If your furloughed employees are working part-time, the monthly cap on furlough pay will be proportional to the hours not worked.
The Government has published a factsheet explaining these changes and has said that it will provide further detailed guidance for employers on how to operate flexible furlough and calculate their claims under the revised Scheme on 12 June 2020.
How we can help
We will update our FAQs and associated documents to reflect these changes and any further Government guidance on how they will work in practice.
Make UK Members can access our Furlough Letters and Resources Pack, which includes helpful checklists and webinar materials on getting your business running again, in the HR & Legal Resources section of our website and can contact their named adviser or the National Advice Line on 0333 202 2221 for legal advice on specific queries.
During the Covid-19 crisis, we are also offering non-members access to the Furlough Letters and Resources Pack for a one-off fee and access to our HR and Employment Law Helpline on a monthly subscription basis. To access the support pack, or sign up for a one month subscription, call us on 0808 168 5874.