Changes to furlough (the Coronavirus Job Retention Scheme)

Yesterday evening the Chancellor of the Exchequer Rishi Sunak made his long-awaited announcement about the future of the Coronavirus Job Retention Scheme (CJRS).

We already knew from previous announcements that the scheme was due to run until October 2020 (as we covered in our previous article here) and that employers would be expected to contribute in some form from 1 August onwards. There had also been hints that in future it would be possible for employees to do some work whilst on furlough.

The key points from his announcement on 29 May were as follows:

Last date for new entrants to the scheme

Importantly, the scheme will close to new entrants from 30 June 2020. However, in practice the last date for employees to be furloughed will be 10 June, because this will allow the employee to spend 3 weeks on furlough before 1 July, which is when the rules change to allow employees to carry out some work (more details on that below).

The Government’s guidance states that after the scheme closes to new entrants “employers will only be able to furlough employees that they have furloughed for a full 3 week period prior to 30 June.” Therefore anyone who has been furloughed for at least 3 weeks previously will still be eligible for the scheme, even if they are not necessarily on furlough in the period immediately before 30 June.

The CJRS has already had a huge takeup, but with this rule change we would not be surprised to see numbers increase even further by 10 June, so that employers will ensure they have the option to use the scheme for as many employees as possible from 1 July onwards. The Government has said that “the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS.”

What were the main points about the employer’s contribution?

• The scheme will continue with the Government reimbursing 80% of employees’ pay (up to £2,500) plus National Insurance contributions and auto-enrolment pension contributions during June and July 2020

• For August 2020 the Government will continue to reimburse 80% of pay up to £2,500, but for the first time employers will be responsible for National Insurance contributions and auto-enrolment pension contributions. This is approximately 5% of the employment costs for each employee. (Apparently 40% of employers haven’t been claiming for this anyway).

• Then, for September the Government’s contribution will drop to 70% of wages up to a cap of £2,190. Employers will be responsible for paying 10% of wages, plus the National Insurance contributions and auto-enrolment pension contributions.

• For October 2020 (the last month of operation of the scheme) the Government will pay 60% of wages up to £1,875, with employers paying 20% (plus the NI and pension contributions).

• From 1 July onwards, claims under the CJRS will not be able to overlap months, because of the rule changes above.

What do we know so far about employees being able to do some work whilst furloughed?

The Government have said that from 1 July 2020 “employers will have complete flexibility to decide on the right arrangements for them and their staff.” This is one month earlier than the Chancellor had previously thought and is being called “flexible furloughing”. The cap on the amount the Government will pay for furlough will be proportionate to the hours not worked by the employee, but how this will be calculated is not yet clear.

The Government has said that further guidance on flexible furloughing will be issued on 12 June (of course this is 2 days after the last date for new entrants to the scheme). We will of course provide further updates once that information has been released.

From what has been announced so far, it will be up to employers to decide what part-time means in terms of hours and shift patterns for when employees return to work. However, for all hours worked, the employer will be responsible for 100% of the employee’s wages.

Under the revised scheme employers will apparently be required to submit data on the usual hours an employee would be expected to work in a claim period and the actual hours that they did work. This will be more straightforward for employers who have a clocking in system, but is likely to be more complicated in organisations where there is not currently any formal method of recording employees’ working hours. We expect that some further rules will be introduced in relation to this, as on the face of it there is considerable scope for this to be abused.

Flexible furloughing will presumably involve a further change in terms being agreed between the employer and employee, which will need to be documented. Hopefully details of this will be covered in the subsequent guidance.

Will this stave off potential redundancies?

Before this announcement was made, we had already had enquiries from a number of employers who were extremely concerned by the requirement to contribute to the scheme from 1 August onwards and were having to make plans for redundancies, with a view to trying to ensure that as much of the employees’ notice periods as possible fell within the CJRS. Fortunately, the contribution from 1 August is relatively modest, and this may mean that there is a little more time. However, for some organisations even a modest contribution may be more than they can afford at the moment.