The Coronavirus Job Retention Scheme (CJRS), also known as the furlough scheme, was originally due to end on 31 October 2020 and to be replaced by the new Job Support Scheme (JSS) on 1 November 2020. However, in light of the looming second national lockdown of England, the government first announced an extension of the scheme until 2 December, which was soon followed by another statement by Chancellor Rishi Sunak who confirmed that the scheme would be extended further until 31 March 2021. Due to the extension, the planned JSS is currently shelved and it is not known when it will be implemented, if at all.
The subsequent information given in this article is based on the updated guidance and Treasury Direction published on 13 November 2020. The fourth Treasury Direction (made under Sections 71 and 76 of the Coronavirus Act 2020) formally extends the CJRS from 1 November 2020 until 31 March 2021 and outlines how it will operate between 1 November 2020 and 31 January 2021. In January, the government will review the policy to decide whether to increase the employer contributions and will therefore issue further guidance for February and March later.
The level of support under the extension will mirror that received in August
Since the initial launch of the CJRS in March 2020, the scheme has been updated a number of times. Towards the Autumn, and with the intention of ultimately ending the scheme on 31 October, the employer contributions towards the furloughed employee’s wage gradually increased.
- In August, employers started to pay National Insurance and pension contributions.
- In September, the government paid 70% of wages up to a cap of £2,187.50 while employers paid National Insurance and pension contributions, and 10% of wages to make up the 80% of the total up to a cap of £2,500
In October, the government paid 60% of wages up to a cap of £1,875 while employers paid National Insurance and pension contributions, and 20% of wages to make up the 80% of the total up to a cap of £2,500.
While the updates on 13 November 2020 introduced some notable changes to the scheme (presented in the next section), between 31 November – 31 January, the scheme will largely operate the same way it did in August:
- The Government will cover 80% of the employee’s usual salary for hours not worked, up to a cap of £2,500.00 per month while employers will cover National Insurance and pension contributions for hours not worked.
- Employers can choose to top up employees’ wages above the 80% contribution if they wish, but it is not required.
- Employers are also responsible for paying 100% of the hours worked (alongside with National Insurance and pension contributions), and the grant will then be prorated to cover the hours not worked.
- Both full-time furlough and flexible furlough are permitted. Under flexible furlough, the employee can work a flexible number of hours and different work patterns, and the employer can also vary the hours depending on the business’s needs.
- It is important that employees do not work for the business in any form during the hours which they have been recorded as being on furlough. However, employees can carry out training while on furlough.
- The furlough must be agreed in writing between the employer and the employee.
- There is no minimum furlough period. However, unless otherwise specified, the minimum reporting and claim period for furlough is seven consecutive days.
- The claim can only be made on incurred costs with businesses being able to claim either shortly before, during or after running payroll.
This extension of the CJRS with the August terms is likely to be welcome news for many businesses, as it is more generous than the CJRS that was running in September and October, as well as the planned JSS.
Important changes to the scheme between 31 November 2020 and 31 January 2021
The Treasury Direction on 13 November stresses that “it is integral to the purpose of CJRS that claims relate to those whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission”. In essence, this means that the claim should be made only for those jobs that are genuinely impacted by Covid-19, and by submitting a claim for other reasons would be an abuse of the CJRS. This seems to be a step away from the initially wide application of the furlough scheme, as the first Treasury Direction back in April 2020 outlined that the CJRS could be used to cover “employment costs arising from the health, social, and economic emergency in the UK arising from coronavirus”.
In light of the above, it is also important to note that from December 2020 onwards, HMRC plans to publish employer names, an indication of the value of the claim and the company registration number of those who have made claims under the scheme.
Other notable updates to the scheme include:
- The government has withdrawn the Job Retention Bonus given that the purpose of it has been superseded by the extension of the CJRS.
- From 1 December 2020 onwards, employers cannot make a claim for a person who is serving a contractual or statutory notice period (including notice served because of retirement or resignation). Claims relating to November 2020 can include those serving statutory or contractual notice.
- Any employee made redundant, or who has stopped working for the employer on or after 23 September 2020, can be re-employed and put on furlough. This applies provided the employee was employed on 23 September 2020 and the employer made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee.
Although it is permitted to rehire and furlough the employees who have been made redundant in the past, it is important to only use the scheme for jobs which the employer expects to be viable. Therefore, employers should be careful not to abuse the scheme and consider whether a job would only exist under the furlough system. It is also important to note that while the employer has the option of bringing back the redundant employees, it is not compulsory.
The government has also published a step by step guidance for employers, which explains the information that employers need to provide to claim for their employees’ wages.
In case you have any questions, please get in touch with our HR Manager Jacqui Brown at firstname.lastname@example.org.