On 5 November 2020 the Chancellor announced the extension of the Coronavirus Job Retention Scheme (CJRS) for all parts of the UK until 31 March 2021. A policy paper was released last week with some basic details of this extension. We now have a collection of new guidance which can be found here. There are eight different guidance documents for employers that need to be considered.
We have set out below some of the key changes made to the CJRS for the period from 1 November 2020, along with some of the key outstanding questions.
Which employers can use the extended CJRS?
The eligibility conditions for the scheme have been widened. Employers will be eligible to claim the grant if they have a UK bank account and UK Pay As You Earn (PAYE) scheme.
Unlike the now obsolete Job Support Scheme, all UK employers, both large and small can use the CJRS without having to fulfil a financial impact test. Employers across the UK can claim under the CJRS, whether their businesses are open or closed. Employers who have not previously furloughed anyone can use the CJRS as employers do not need to have submitted a claim under the CJRS prior to 31 October in order to claim under the extended CJRS.
Can employers only use the CJRS if it is to avoid redundancies?
The Treasury Direction for the original CJRS stated that it applied to employees who were furloughed, “by reason of circumstances arising as a result of coronavirus or coronavirus disease or measures taken to prevent or limit its further transmission” but that no claim may be made if it is “abusive” or “otherwise contrary to the exceptional purpose” of the scheme.
The latest Guidance for employers states that employees can be furloughed if the employer “cannot maintain its workforce because its operations have been affected by coronavirus”. Similarly, the latest employee guidance indicates that employers may use the CJRS if “they are unable to operate or have no work for the employee to do because of coronavirus”. It then states that the CJRS is designed to help employers whose operations have been severely affected by coronavirus to retain their employees and protect the UK economy, although all employers are eligible to claim under the scheme and the government recognises that different businesses will face different impacts from coronavirus.
It seems that employers still have some discretion, but they should take care not to abuse the CJRS.
What are the eligibility criteria for employees?
Helpfully, employers will also be able to claim a grant under the CJRS in respect of employees who have not previously been furloughed, provided that the employee was employed and on the employer’s payroll on 30 October 2020 (and provided the employer had made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying HMRC of a payment of earnings for that employee).
Where previously the furlough scheme had a limit on the number of employees that employers could claim for, there is now no maximum number of employees that can be claimed for from 1 November 2020.
Can employees who were made redundant in the run up to the end of the original CJRS be re-hired?
Yes, in certain cases. Many employees were made redundant in the last weeks of the previous furlough scheme when there was no indication that the CJRS would be extended. Employees who were made redundant or who stopped working for their employer on or after 23 September 2020 can be re-employed and furloughed by their former employer. To be eligible, such employees must have been employed by their employer on or before 23 September 2020 (and the employer must have made a PAYE RTI submission to HMRC between 20 March 2020 and 23 September 2020 in respect of them). Employees on fixed-term contracts that have expired since 23 September can also be re-employed and claimed for.
Although this sounds helpful in principle, re-hiring in these circumstances is fraught with practical and legal difficulties for employers. For example, if employers have already undertaken collective consultation, notified the Secretary of State and paid for notice periods and statutory redundancy pay, it is unclear which of these will need to be repeated if an employee is re-hired and then made redundant again.
Will HMRC publish the names of those employers claiming under the extended CJRS?
Importantly, from December 2020, HMRC will publish employer names and company registration numbers for those companies and LLPs who have made claims under the CJRS for the month of December onwards. Employers may wish to consider whether they are happy for this to be public and should be prepared to defend using public money prior to making a claim for December.
Is flexible furloughing still available?
Yes. From 1 November 2020, employers can continue to either fully furlough employees (where they do not undertake any work) or flexibly furlough employees (where they work for a portion of time and are on furlough for the remainder).
How much can employers claim under the extended CJRS?
From 1 November 2020, employers can claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month.
What do employers have to pay under the extended CJRS?
In November and December 2020 and January 2021, employers will only be required to pay National Insurance Contributions and pension contributions, making the extended CJRS more generous than the previous version of the CJRS as it applied in October 2020 (when employers were also required to contribute 20% of the employee’s salary and the government paid the remaining 60%). Employers may still choose to “top up” the employee’s wages at their own expense.
The government will review the CJRS in January 2021, “to decide whether economic circumstances are improving enough to ask employers to contribute more.”
Do we need to get written agreement from the employee to put them on furlough?
The guidance has not changed in this respect. The Guidance says that “employers should discuss with their staff and make any changes to the employment contract by agreement”. It also says that, in order to be eligible for the grant, employers must write to their employees confirming that they have been furloughed and keep a record of this communication for five years. Further, it states that “the employee does not have to provide a written response”.
This implies that consent is not needed to designate employees as furloughed employees or to put them on furlough leave. However, from an employment law perspective, consent is needed in relation to changing the terms of the employment contract, in particular for any reduction in pay. If the employee’s pay is reduced without consent, the business will be at risk of breach of contract claims or unauthorised deduction from wages claims. It is important, therefore, that where an employer is reducing an employee’s pay, the employee signs and returns a furlough agreement or letter consenting to the reduction to their pay before the reduction takes place.
Can we backdate our furlough letter to 1 November 2020 even if we only enter into it this week?
Yes, but the deadline by which this agreement needs to be in place is Friday 13 November 2020. Employers can put retrospective agreements in place to take advantage of the extended CJRS from 1 November 2020, but only up until this date. This is of course subject to the other eligibility requirements being met. Further, the employee must have genuinely been furloughed during this time. If the employee was in fact working their usual hours, furlough cannot be backdated.
Can we start a redundancy procedure or put employees on notice of redundancy whilst claiming under the extended CJRS?
For the first month of the extended scheme, from 1 November until 30 November 2020, employers can carry out redundancy consultation and give notice to employees whilst still claiming a grant, as per the previous scheme.
However, importantly, for claim periods starting on or after 1 December 2020, employers cannot claim for any days during which the furloughed employee is serving a contractual or statutory notice period (this includes people serving notice of retirement or resignation).
Do we need to consider furlough as part of an ongoing redundancy procedure?
Yes, as furlough is potentially an alternative to redundancies. In particular, those employers in the midst of redundancy processes should be able to demonstrate that they have considered whether the extended furlough scheme is a viable alternative to redundancy for some employees and, if not, they should have clear reasons why that is the case.
Can we furlough employees who are clinically extremely vulnerable?
Yes. Employees who are clinically extremely vulnerable have been advised to work from home. If they cannot work from home, they have been advised that they should not attend work for the lockdown period. Such employees or those at the highest risk of severe illness from coronavirus and following public health guidance are eligible for the grant and can be furloughed.
Can we furlough employees who cannot work due to COVID-related childcare reasons?
Yes. Although schools are still officially open, many working parents are finding themselves with their children at home again when teachers or classmates test positive for coronavirus. The guidance says that if an employee is unable to work because they have caring responsibilities resulting from coronavirus (including employees that need to look after children) they are eligible for the grant and can be furloughed.
Can we furlough employees who are self-isolating?
The CJRS is not intended for use for short-term absences from work due to sickness or self-isolation. Instead, employees who are on sick leave or self-isolating as a result of coronavirus may be entitled to Statutory Sick Pay.
The Guidance states that short term illness or self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are permitted to do so. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.
Can we end maternity leave early in order to furlough an employee?
Yes, employees can choose to do this with their employer’s agreement. However, such employees would need to give eight weeks’ notice (or in certain cases employers can agree to a shorter notice) of their early return from maternity leave. The employer may not put them on furlough until the expiry of that eight week (or shorter agreed) period. It is not clear in what circumstances it is appropriate to shorten the eight week period.
What is the correct reference period for working out “usual wages”?
Employers need to work out 80% of their employee’s usual wages to determine how much they have to pay their employees for the time they are furloughed and what they can claim under the CJRS. There are now two different reference periods that can apply:
- The previous CJRS calculations in respect of “usual wages” will apply to all employees who were eligible under the original CJRS, even if a claim was not made in respect of that employee before 1 November 2020. So, this applies to two categories of employee:
- Those employees who were on the employer’s payroll on 19 March 2020 (where their employer made a payment of earnings to them in the tax year 2019 to 2020 which was reported to HMRC on a RTI Full Payment Submission on or before 19 March 2020); and
- Those employees who were furloughed in a claim period ending any time on or before 31 October 2020
For those employees with fixed hours and pay, the reference period is the last pay period ending on or before 19 March 2020. For those with variable pay the calculation would be 80% of the higher of the wages earned in the corresponding calendar period in the tax year 2019 to 2020 or the average wages payable in the tax year 2019 to 2020.
- An updated reference period is applicable to all other employees (i.e. those employees who were on the employer’s payroll after 19 March 2020 but before 30 October 2020).
This reference period (for those on fixed hours and pay) will be their last pay period ending on or before 30 October 2020. For employees with variable pay, the 80% is calculated on the basis of their average pay between the start date of their employment or 6 April 2020 (whichever is later) and the day before their furlough leave under the extended CJRS begins.
Is the calculation for “usual hours” different?
Where an employee is flexibly furloughed, the employer must work out the “usual hours”. This can be complicated, particularly for those with variable hours. The same changes have been made to reference periods for “usual hours” as above for “usual wages”, so the calculation of usual hours is now different for those employees who were not previously eligible under the CJRS. For those with fixed hours and pay, their “usual hours” will be the contracted hours worked in the last pay period ending on or before 30 October 2020. For those employees with variable hours, their “usual hours” will be the average hours worked from 6 April 2020 and up to the employee’s first day spent on furlough on or after 1 November 2020.
How do we calculate 80% of usual wages for employees who have been on unpaid leave or on a sabbatical?
The guidance states that if an employee has been on an unpaid sabbatical or unpaid leave, the employer will need to use the amount that employee would have been paid if they had been on paid leave when calculating 80% of their wages.
This is quite straightforward for those who were on the payroll on or before 19 March and are on a fixed salary. The employer can calculate 80% of the wages payable in the last pay period ending on or before 19 March 2020. In most cases, this will mean 80% of full pay, prior to the reduction.
For those employed after 19 March 2020, where the reference period is the last pay period ending on or before 30 October 2020, it is not so clear. However, the guidance suggests that the calculation should simply be on the basis of the amount they would have been paid if they were on paid leave.
When can employers start to make claims under the extended CJRS?
Claims may be submitted under the extended CJRS from 8am on 11 November 2020. All claims made in respect of November 2020 must be submitted by no later than 11.59 pm on 14 December 2020. Claims relating to each subsequent month should be submitted by 11.59pm on day 14 of the following month, unless it is a weekend, in which case claims should be submitted on the next working day.
30 November 2020 is the last day that employers may submit claims for periods ending on or before 31 October 2020.
Are there any new rules in relation to TUPE transfers?
The guidance on TUPE transfers has changed for claim periods after 1 November 2020. The guidance states that a new employer can make a claim under the extended CJRS for employees that have transferred to it pursuant to TUPE on or after 1 September 2020. This applies only where those employees were employed by either their old employer or new employer on 30 October 2020 (and provided that that employer had made a PAYE RTI submission between 20 March 2020 and 30 October 2020, notifying HMRC of a payment of earnings for that employee).
Will there be any further guidance?
HMRC have issued a treasury direction setting out the formal rules of the extended CJRS. See here for our alert on the treasure direction.
Kerry Garcia
Frances Rollin