The extension of the furlough scheme

Hello, my name’s Paul Griffin and I’m head of the employment and labour team at Norton Rose Fulbright in London. 

As you all know, at the same time as announcing the national lockdown in England which began on 5 November, the UK Government announced that the Coronavirus Job Retention Scheme, which was due to come to an end on 31 October, would be extended.  Initially the indication was that this would be until the end of lockdown, hopefully the beginning of December, but the Chancellor later announced that the scheme will run until the end of March 2021.  This means that the Job Support Scheme, which was due to come into effect on November 1st, will not come into force.  

The Government has now published different sets of guidance on the extended CJRS, or furlough scheme. In addition, on 13 November the Treasury published a Treasury Direction which is the legal framework for the scheme.  So in this video I will look at some of the points that employers should note from the extended scheme. 

The period of the Scheme

Despite the Chancellor announcing that the scheme would run until end of March the government was clear that the scheme would be reviewed in January and, indeed, the Treasury Direction only relates to how the scheme will operate between 1 November 2020 and 31 January 2021.  A further Treasury Direction covering February and March will be published in due course.  The government will review the Scheme and may increase the contribution required by employers.

The level of support available under the scheme during this period up to end of January mirrors that which was available under the scheme earlier in the summer.  This means that employees will receive 80% of their current salary for hours not worked up to a cap of £2,500. Employers will only be required to cover National Insurance contributions and employer pension contributions for the employees.  So the extended scheme is more generous for employers than the scheme which had been in place up to the end of October, which was limited to 60% of normal pay. 

Which employees and how to place them on furlough?

Employers can claim in respect of employees who were on the employer’s PAYE payroll just before midnight on 30 October. The guidance has clarified that employees who were made redundant or stopped working for a business on or after 23 September can be furloughed as long as they are rehired by the employer. 

The employer must reach a formal agreement with staff before they can be furloughed.  The agreement should be reached before the start of the period of furlough to which that claim relates, although it can subsequently be varied.  There was an exception to this for claims from 1 November.  Employers had until 13 November to put in place agreements which could be backdated to 1 November.  The agreement must be retained for five years and provided to HMRC if requested.

For claims prior to 1 December the employer can claim even if the employee is on statutory notice – it isn’t clear what the position is with regard to contractual notice although the presumption is that it can be both. – although the claim cannot be made with regard to the redundancy payment itself.  The guidance has now clarified that the position will change from 1 December so that it will no longer be possible for employers to use the scheme to meet the wage costs of employees working statutory or contractual notice.  This may lead some employers to review their ongoing use of the furlough scheme and redundancies, but employers do need to bear in mind that they should follow fair procedures to avoid any unfair dismissal claims and may need to comply with collective consultation obligations, which will have an impact on the timing of any dismissals

When can claims be made?

The guidance sets out when claims should be made.  It  includes a table setting out when claims for each month must be submitted by. So, for example, any claims for November must be submitted by 14 December.  The proposal is that, as under the existing scheme, businesses will be able to claim either shortly before, during or after running the payroll.  The intention is that payments should be made within 6 working days of the claims.

Information to be made public by HMRC

HMRC will publish information on employers using the extended scheme from 1 December.  The guidance has clarified that the information which may be published is the name of the employer, the company registration number and the amount of the claim being made by the employer, or a reasonable indication of the claim rather than the exact amount.  There is discretion on HMRC not to publish the information if they are satisfied that its publication will expose any person employed or engaged by the employer, or any individual living with them to serious risk of violence or intimidation. This may affect the view of some employers as to whether they want to submit a claim after 1 December.

Another important point in the Treasury Direction is confirmation that the Job Retention Bonus which was due to come into effect in January is officially withdrawn and no claims will be made under that scheme.

As always, the situation with regard to the working environment is constantly changing and you need to make sure that you are up to date on the government guidance.  Clear communication with employees is also going to be critical.  Please feel free to contact any of the team here if you need any further advice.

Please stay safe and I look forward to seeing you in my next video.