Furlough - The Beginning of the End
Approximately 8.7 million workers, or one quarter of all PAYE employees are currently furloughed under the Government’s Coronavirus Job Retention Scheme (“CJRS”). The Government has now revealed its plans to taper down the scheme over the next 5 months. In this article Lisa Hatch looks at the key recent announcements up to 5 June 2020.
A summary of what’s changed
Extension: the scheme has been extended to the end of October 2020 - see further below.
Closure to new entrants in June: the CJRS will close to new entrants from 30 June 2020, so new entrants must be furloughed by 10 June 2020 - see further below.
Reduction in grant: from 1 August 2020 the amounts that employers will be able to recover under CJRS will be slowly tapered and reduce month upon month - see further below.
Part-time furlough: from July, there will be new flexibility allowing furloughed staff to return part-time. Employers will be expected to top up their wages- see further below.
New Treasury Direction: On 20 May 2020 the Chancellor made a second Treasury Direction on CJRS- see further below.
New Guidance of Calculating Wages: On 5 June 2020 HMRC published updated guidance for employers on how to work out 80% of your employees’ wages - see further below.
New Guidance for Employees and Employers: On 5 June 2020 HMRC published updated guidance for employers, and employees on furlough - see further below.
Extension of furlough scheme to 31 October 2020
Closure to new entrants in June
The CJRC will close to new entrants from 30 June 2020.
This means that 10 June 2020 is the last day on which someone who has never been furloughed can start a period of furlough and qualify for the scheme. This is because employers will only be able to furlough employees that have been furloughed for a full 3 weeks prior to 30 June 2020.
Employers will then have until 31 July 2020 to make a claim for any periods of furlough up to 30 June.
Reduction in sums recoverable under CJRS from 1 August 2020
On 29 May 2020 HM Treasury announced a new taper requiring employers to contribute to furloughed salaries from August 2020.
In June and July 2020 the government will continue to pay 80% of wages (up to a cap of £2,500) as well as employer NI and pension contributions.
From 1 August 2020, employers will have to pay employer’s NI contributions; and pension contributions, and will no longer be able to reclaim them through the CJRS.
The government will continue to pay 80% of wages (up to a cap of £2,500).
From 1 September 2020, the government will only reimburse 70% of wages (up to a cap of £2,187.50). Employers will have to pay employer’s NI and pension contributions and need to top-up employees’ salaries to 80% or more, depending on what they have agreed with the employee. The Treasury estimates that for an average claim, the employer contribution will be 14% of the gross employment costs, had the employee not been furloughed.
From 1 October 2020, the government will only reimburse 60% of salary (up to a cap of £1,875). Employers will have to pay employer’s NI and pension contributions and will need to top up employees’ salaries to 80% or more depending on what they have agreed with the employee. The Treasury estimates that for an average claim, the employer contribution will be 23% of the gross employment costs, had the employee not been furloughed.
Part-time furlough possible from 1 July 2020
From the start of July furloughed workers will be able to return to work part-time.
Employer guidance issued by HMRC says that employers can bring back to work employees who have previously been furloughed for any amount of time and any shift pattern, while still claiming under the CJRS for their normal hours not worked.
When claiming the grant for furloughed hours employers will need to report and claim for a minimum period of 1 week.
Further details of the part-time scheme are yet to be announced.
New Guidance on Calculating Wages
on 5 June 2020 HMRC published updated guidance on how to work out 80% of your employees’ wages.
This update followed on from updates on 14 May, 21 May and 29 May 2020. The latest update includes Information on how the scheme is changing, information to define the claim period, information about amending the claims and what to do if too much is claimed from the scheme.
New Treasury Direction
The new Treasury Direction was made on 22 May 2020.
The new Direction clarifies the provisions on applications for employees who have been on statutory sick pay and unpaid leave.
It also slightly expanded the provisions on furloughed Directors who are permitted to undertake work relating to: fulfilling a statutory obligation, the filing of company accounts or the provision of other information relating to the administration of their company, making a CRJS claim in respect of an employee of the company, or making a payment of salary or wages to an employee of the company.
The Direction also now covers collective agreements made between an employer and a trade union that an employee will cease all work in relation to their employment whilst on furlough.
New Guidance for Employees and Employers
Information published in past few weeks signals the beginning of the end of the Coronavirus Job Retention Scheme. As the weeks unfold, no doubt further information will be revealed. New guidance is expected this week and we will try to keep you updated as and when information becomes available.
In the meantime, if you would like any further information on furlough or any other employment related issue arising out of Covid-19, or more generally, please contact Lisa Hatch or Ian Hogg at firstname.lastname@example.org or on 0207 936 3030.
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