Employment Law: Coronavirus Job Retention Scheme (Update)
In a guest blog post, Matt Jenkin, Employment Partner at Moorcrofts LLP looks at recently announced changes to the Coronavirus Job Retention Scheme.
As part of the support measures to help businesses cope with the economic impact of the Coronavirus pandemic and to encourage employers to retain their workforce, the Government has introduced the Coronavirus Job Retention Scheme (CJRS).
The CJRS has introduced for the first time in the UK the concept of furloughed leave and furloughed employees. The CJRS allows employers to claim some of the wage costs for furloughed employees from the Government so long as the employees are furloughed in accordance with the CJRS. The key elements of the scheme are:
- The CJRS is open to all UK employers from 1 March 2020 until 31 October 2020 (an extension on the original end date of 31 May 2020);
The scheme will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June. This means that the final date by which an employer can furlough an employee for the first time will be the 10 June, in order for the minimum three-week furlough period to be completed by 30 June. This cut off point doesn’t apply to those returning from family friendly leave such as maternity leave after that date;
- Up to 31 July 2020, employers are able to recover by way of a grant from HMRC the lower of 80% of a furloughed employee’s regular wage or £2,500 per month plus associated Employer National Insurance contributions and minimum automatic enrolment pension contributions on that reduced wage;
- During August, the government will pay 80% of wages up to a cap of £2,500. Employers will pay Employer National Insurance contributions and minimum automatic enrolment pension contributions on that reduced wage;
- During September 2020, the government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500;
- During October 2020, the final month of the scheme, the government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500;
- The CJRS only applies to employees on the PAYE payroll as at 19 March 2020. This is a change from the previous cut off point of 28 February 2020. This doesn’t mean that employees who started after this date can’t be furloughed but if they are, the employer can’t reclaim the wage costs under the CJRS scheme;
- Employers can, but are not obliged to, “top up” these payments (other than the contributions in September and October 2020). Employers who do top up can’t claim the additional wage cost of the top up under the CJRS;
- The payments made to the employee are still subject to tax and the usual deductions;
- Until 1 July 2020, to be eligible a furloughed employee can't undertake any work for or on behalf of their employer. They can, however, take part in training and volunteer work as long as they are not generating revenue or providing services for or on behalf of the employer. As such, employees who are, for example, working reduced hours for reduced pay will not until 1st July 2020 be covered under the CJRS and the employer would be responsible for meeting the full costs of that reduced pay;
From 1 July 2020, employers can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked. From 1 July, employers will be able to agree any working arrangements with previously furloughed employees. To be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm that agreement in writing. The employer should keep a written record of this agreement for five years and keep records of how many hours their employees work and the number of hours they are furloughed (i.e. not working).
- Employees can start a new job with another employer whilst on furlough leave. The Guidance does say that this is subject to the employment contract. If an employer has such a restriction in their employment contracts preventing the employee from taking second jobs, this could be waived during the duration of the furlough leave;
- Whilst on furlough, employees continue to accrue and can take holiday. Details of how holiday and furlough should be dealt with, including holiday pay are set out in separate Government guidance: https://www.gov.uk/guidance/holiday-entitlement-and-pay-during-coronavirus-covid-19?utm_source=458b84c0-5181-43ea-9d13-fd803529f23d&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate;
To be eligible, and until 1st July 2020, the minimum period of furloughed leave must be 3 weeks. Based on current guidance, employers can take employees in and out of furlough on a 3-week cycle, or a longer cycle, if they want to spread the burden of actual work. From 1 July, the 3-week minimum period will no longer apply and flexible furlough agreements can last for any period. Employers do have a discretion as to which employees to place on furlough but that discretion is subject to the need to comply with equality and discrimination law. As such employers selecting which employees to be furloughed should keep a note of their reasoning for this if challenged later. Employees can ask to be furloughed but that is not something that an employer has to allow;
- Furloughing an employee will usually involve a change to the employee’s contract of employment not least as many employers are looking to reduce salary levels during furlough leave down to the maximum contribution available from the Government. As such employers will have to agree that change with the employee and should be mindful that employment law continues to apply including potential collective consultation obligations. As such, employers should look to take legal advice on how the steps that they need to take to properly furlough employees. However, it does appear from experiences to date that employees are taking a pragmatic view to this and agreeing to furlough given the alternative options that might follow if they don’t agree;
- To be eligible, employers must confirm in writing to the employee that they have been furloughed. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years; and
- The wage costs being claimed for furloughed employees are recovered via an online portal which is open and claims usually take 4-6 days to process. HMRC have made clear that they will retrospectively audit the claims so employers should ensure that they have records in place to show that employees were properly furloughed which should include written communication with the employee confirming that they have been furloughed.
Further Government guidance on the CJRS can be found at:
- Check if you can claim under the CJRS -
- Which employees you can claim for -
- Steps to take before calculating your claim -
- Calculate how much you can claim -
- Example of how to work out what you can claim -
Of course, furloughing employees is not an option that works for all employers and employees. In addition, from August onwards, the cost of furloughing employees will increase which for some employees mean that continuing furlough is not something they can continue with.
Employers will be increasingly looking at other cost saving measures such as salary reduction, unpaid sabbaticals, reduced working hours requiring employees to use holiday and, unfortunately, in some cases, redundancy. Employers considering these alternative options should again be mindful that any such action is subject to the contract of employment and employment law and seek appropriate advice before they implement any such measures.
For more information on any of the topics covered, please contact Matt Jenkin ([email protected]) directly, or contact your usual Howden Consultant.
Please note that information and any commentary contained in this article is provided for information purposes only and does not, and is not intended, to constitute legal advice to any person on a specific case or matter. Every reasonable effort is made to make the information accurate and up to date, but no responsibility and correctness or for any consequences of relying on it, is assumed by the author or its publisher.