On 20 March 2020, the UK Government announced the largest state economic intervention in peacetime, to prevent hundreds of thousands of employees being placed on lay-off or made redundant. Through the Coronavirus Job Retention Scheme (CJRS), the Government have committed to reimbursing 80% of employees’ wage costs, up to a cap of £2,500 per month. The scheme is open to all UK employers, regardless of size.
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The CJRS runs from 1 November 2020 through to 31 March 2021. Unlike the summer variations of the CJRS, the Government has returned to paying 80% of an employee’s salary for the hours spent on furlough, up to a total cap of £2,500 a month, with no obligation on employers to top this up to 100%. Employers will continue to be required to pay employer national insurance contributions and pension contributions in respect of furloughed employees’ wages. This is the same CJRS that was first implemented in from 1 August 2020 under the flexible furlough scheme. This current version of the CJRS is due to be reviewed by the Government in January 2021.
Employers are eligible to claim under the CJRS scheme even if they have not previously furloughed an employee on the old CJRS between March – October, provided the employee was included in the employer’s real time information payroll submission to HMRC between 20 March 2020 and 30 October 2020
The timeframe for making claims is as follows:
|Period in which furlough took place||Deadline to submit the claim|
|November 2020||14 December 2020|
|December 2020||14 January 2021|
|January 2021||15 February 2021|
|February 2021||15 March 2021|
|March 2021||14 April 2021|
As the CJRS is open to employees who have not previously been furloughed, there is no maximum number of employees who can be claimed for under the scheme from November 1. This does not apply to CJRS claims for employment earlier than 1st November, and the previous rules apply.
Employers can no longer submit claims for any periods of furlough absence ending on or before the 31 October 2020
Yes, nothing in the Treasury Directions or HMRC guidance prohibits employees being simultaneously on furlough and on maternity leave if the employee agrees to it. However, this is subject to the following:
HMRC has confirmed that employers can furlough an employee returning from statutory parental leave (including maternity, shared parental, adoption, paternity, or parental bereavement leave) after 1 November 2020 even if this is the first time that they have been furloughed, provided that the employee was on the employer’s PAYE payroll from 20 March to 30 October 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 30 October 2020.
The guidance states that employees can be furloughed multiple times. Under the November CJRS, there is no minimum furlough or flexible furlough period, but the claim submitted to HMRC must still cover a period of at least a week. Employers do not have to furlough all their employees and they can therefore rotate the employees that they place on furlough leave. Likewise, employees can be flexibly furloughed.
Yes, this is referred to as flexible furlough. Working arrangements must be agreed in writing with employees. To calculate payments for flexible furlough, the following approach is advisable:
Employers will need to report and claim for a minimum period of one week.
For an employee on a fixed term contract, provided they were on the payroll between 20 March – 30 October, the employer can re-employ the fixed-term employee and put them on furlough. If the employee’s fixed term contract has not already expired, it can be extended, or renewed.
Employers can furlough an employee who is a military reservist returning to work after a period of mobilisation that ends after 30 October, even if they are furloughing them for the first time. They may do so if:
The guidance states that foreign nationals are eligible for furlough.
The Government guidance has confirmed that directors, including those who are directors of their own personal service companies, can be furloughed.
Directors can be furloughed but still carry out those duties that are reasonably necessary to fulfil their statutory obligations. If a director delegates work to another member of staff, we believe they would then fall outside of the scheme. It is our view that directors’ duties will be construed narrowly and will include anything which keeps the business running/generates commercial revenue. If the director engages in activities for shareholders or undertakes any duties set out in their service agreement whilst on furlough leave (except for those that are reasonably necessary to ensure that they fulfil their statutory obligations), they may fall outside the scope of the scheme.
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed. However, they must be paid at least the Apprenticeship Minimum Wage, National Living Wage, or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means that employers must cover any shortfall between the amount employers can claim for their wages through this scheme and their appropriate minimum wage.
Employers can claim a grant for individuals who are not technically employees under employment legislation provided they are paid through PAYE. This can include:
The Second Treasury Direction permits employees to study or train if the following 3 conditions are met:
While on furlough, employees who are union or non-union representatives can undertake activities for the purpose of individual or collective representation of employees or other workers and this will not be regarded as undertaking work. However, they must not provide services to or generate revenue for, or on behalf of their employer’s organisation or a linked or associated organisation. Whilst on furlough, employees who are pension scheme trustees or trustee directors of a corporate trustee may undertake trustee duties in relation to the pension scheme. However, a professional, independent pension scheme trustee who has been furloughed by the independent trustee company cannot undertake trustee work that would provide services to or generate revenue for, or on behalf of, the independent trustee company or any organisation linked or associated with that independent trustee company whilst on furloughed.
A new employer is eligible to claim for employees of a previous business transferred if the TUPE or PAYE business succession rules apply to the change in ownership.
A new employer can also claim for the employees associated with a transfer of a business from the liquidator of a company in compulsory liquidation where TUPE would have applied were it not for the company being in compulsory liquidation.
Revised Government guidance confirmed that if an employee has stopped working for an employer on or after 23 September, for any reason (e.g. to care for a dependent), the employer can agree to re-employ the employee, place them on furlough leave and claim for their wages from the date on which they were furloughed through the CJRS, provided they meet the eligibility requirement.
However, the employee must have been employed as of 23 September 2020 and stopped working on or after this date and have been notified to HMRC on an RTI submission between 20 March 2020 and 30 October 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 30 October 2020. If an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer should not re-employ them, put them on furlough and claim their wages under the scheme.
Employees already on unpaid lay off on 23 September 2020 will still be on the payroll and can therefore have their status changed to furloughed worker once their unpaid leave has come to an end. Employees who have been made redundant after 23 September 2020 can be reinstated and placed on furlough.
In our view, the PILON can be treated as future salary and the amount paid deducted from their salary for the following months as appropriate, depending on the length of the notice period. As PILONs are now treated as an employee’s salary for tax purposes this should not give rise to tax-related issues, but employers should seek advice from their accountants and or HMRC. Reinstated employees can also be offered the opportunity to repay any holiday pay received on termination and then have their holiday entitlement reinstated.
If employers must make redundancies, they should do so in accordance with the normal redundancy rules. However, since 1 December 2020 employers cannot claim furlough grants in respect of any period an employee is employed under their notice period, howsoever caused, and whether as a result of termination issued by the employer or employee. Also, grants cannot be used to substitute redundancy payments or support payments in lieu of notice. If an employee starts a contractual or statutory notice period on a day that had previously been covered by a submitted claim, the employer must notify HMRC.
Under new legislation, employees are entitled to receive a statutory redundancy payment and statutory notice pay based on their normal wage and not the reduced furlough rate. The new legislation also covers other employment rights where compensation is calculated using average weekly pay, including compensation for unfair dismissal and short time working.
The Government guidance does not prohibit this or make access to the CJRS conditional upon employers retaining employees once the CJRS ceases. However, the explicit purpose of the extended CJRS is to support the payment of salaries and wages paid to employees whose employment activities have been adversely affected by the coronavirus and coronavirus disease, and now precludes payments of furlough grants during notice periods.
Consequently, there is a potential risk of challenge from HMRC if furlough was used to essentially extend the employment and payments to employees who were certain to be made redundant at the end of the scheme.
Government guidance refers to collective consultation potentially being required to obtain consent to the changes being made to terms and conditions where furloughing is proposed, if enough staff will be affected. But given that employers are likely to start with the assumption that all employees will agree to the changes, it is arguably the case that many of them will not at this stage be proposing any dismissals and there is, therefore, no requirement to consult.
There may also be practical difficulties in electing and consulting with employee representatives where places of work have had to be closed. However, if employers are proposing redundancies of 20 or more employees if furloughing is not accepted, or if 20 or more employees raise objections to being furloughed, employers will have to collectively consult.
The updated Government guidance on claiming under the CJRS here states that ‘To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed’. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. 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. There needs to be an auditable written record, but the employee does not have to provide a written response to that confirmation that they have been furloughed. As to what this correspondence should contain:
Under the extended CJRS, since 14 November 2020, any employees who have not previously agreed to be furloughed must agree to be furloughed to commence on or after their date of the agreement, meaning it cannot retrospectively be agreed upon, and a written record of the agreement should be made before any period of furlough leave commences.
The Government guidance refers to employers being ‘reimbursed’ for 80% of furloughed workers wage costs for the period not worked, up to a cap of £2,500 per month. This suggests that employers will be expected to make payments to employees first. Employers should therefore ideally pay their employees throughout this period on their usual pay dates to avoid claims for unlawful deductions from wages and reclaim the payments from HMRC once the portal has opened. Employers who cannot afford to continue to pay wages and need short term cash flow support may be eligible for a Coronavirus Business Interruption Loan (link here).
The Government has confirmed that this is gross pay.
The Government guidance states that if the employee has been employed for 12 months prior to the claim, they are entitled to claim the higher of:
If the employee has been employed for less than the full 12 months, they can claim for an average of their monthly earnings since they started work.
The Government guidance on this point has changed. Previously, it stated that fees, commission, and bonuses should not be included in the calculation of wages.
Under the updated guidance you can now include regular payments that you are obliged to pay including past overtime, fees, and compulsory commission payments. Additionally, any pay made to employees who undertake additional or exceptional responsibilities should be included. However, discretionary bonuses including tips, commission payments, and non-cash payments (such as the value of benefits in kind) must still be excluded from the calculation of wages. Benefits provided through salary sacrifice arrangements (including pension contributions) that reduce an employee’s taxable pay should also be excluded from the calculation.
Where employers provide benefits to furloughed employees, these should be continued unless a different arrangement is agreed with the employee. HMRC has confirmed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements if the relevant employment contract is updated accordingly. The new direction from HRMC states that the employer cannot claim for a salary which is conditional on any matter. Therefore, this could exclude salary payments which the parties have agreed are conditional on receipt of a CJRS payment. Further clarification on this point is awaited.
No, employers will need to pay the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions as they are not included in the 80% pay from the CJRS and cannot be claimed for under the CJRS.
Furlough leave only varies an employee’s right to work and to be paid. Employees will continue to accrue statutory holiday in accordance with the Working Time Regulations. The HMRC guidance states that holiday pay should be paid at the employee’s normal rate of pay. This means that employers will need to top up the 80% furlough payments. The Acas guidance suggests that employers can still request employees on furlough to take holiday as long as they give twice the amount of notice as the amount of required holiday. However, it remains unclear whether taking holiday breaks a period of furlough leave. Employers may be able to vary any additional contractual entitlement to holiday so that this does not accrue, either by means of a contractual right to vary or through agreement.
Employers using the scheme have been able to bring furloughed employees back part-time, while still claiming under the scheme for those hours not worked. This is considered as flexible furlough. So long as each period of flexible furlough claimed for is a minimum of seven calendar days, employees can be brought on and off furlough as many times as is necessary.
It is worthwhile setting up a flexible furlough arrangement with an employee in writing and agreeing an on/off basis so that both the employer and employee are clear on the days and hours they will be working, and the employer has a clear audit trail.
It was not initially clear whether employers could move employees on long term sick leave onto furlough. However, Government guidance later confirmed that employers could choose to furlough these employees for business reasons along with other employees. These employees would then be classified as furloughed employees and should no longer receive sick pay. An employee furloughed in these circumstances can either continue to be furloughed or be furloughed for the first time, from 1 November so long as they meet the other eligibility requirements and were on the employer’s payroll before 30 October 2020.
Employees placed on furlough will still retain their right, if eligible, to Statutory Sick Pay (SSP). This means that sick employees must be paid at least SSP although employers can choose whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate. When deciding which course of action to take, employers should be alert to the possibility of discrimination. If employers move employees from furlough leave to SSP, employers cannot claim for furloughed salary whilst the employee is receiving SSP. Employees must pay SSP themselves as usual. Moving a furloughed employee onto SSP if they become sick appears to be of little advantage to employers. If an employee is already on SSP, the new Treasury direction allows for employers and employees to agree when that period of incapacity is ended, and the furlough leave can begin.
The Government has confirmed that it permits employees placed on furlough leave by one employer to continue to work for another employer. This is subject to the contract of employment between the employee and the primary employer permitting working elsewhere, and that other work must not directly or indirectly benefit the primary employer.
Once again, the question here is whether the furloughed employee who is participating in a disciplinary, grievance, or performance improvement process (PIP) will be ‘working’. The answer is likely to be ‘no’ in relation to the employee concerned – (except in relation to PIPs as these clearly cannot be dealt with while the employee is on furlough) and these processes could therefore in theory continue during furlough.
The Job Retention Scheme 80% contribution is a grant paid to the employer. As a result, it is the employer’s responsibility to:
The Job Retention Bonus was a planned one-off payment to employers of £1,000 for every employee who they previously claimed for under the CJR scheme, and who remains continuously employed from 1 November 2020 through to 31 January 2021. Employers were planned be able to claim the Job Retention Bonus after they have filed PAYE for January and payments will be made to employers from February 2021. However, with the extension in the CJRS, the implementation of the job retention bonus scheme has been pushed back, and it remains to be seen if the bonus scheme will be put in place to follow the end of the CJRS in April 2021.
Again, the Job Retention Bonus Scheme has now been paused with the extension of the CJRS, and it remains to be seen if this scheme or a similar scheme will be put in place following the end of the CJRS in April 2021.
The Government will cease CJRS contributions on 30 April After that, employers face three principal choices. In absence of any further extension or new form of support, such as the now suspended Job Support Scheme, the first is bringing all workers back into the workplace (either at home or in the office) to commence work again at their normal contracted hours.
The second is that employers and employees agree on a reduction in hours (and likely pay) known as short-time working if the business is still being affected by the economic and industrial complications COVID-19 has caused and the workstream that the employer now has cannot sustain the employee(s) at the same level as it did at the start of the year.
Thirdly, if contractual amendments and reduction of hours/days are not appropriate, and an employer still cannot justify the full-time wages of all of its furloughed (and non-furloughed) staff, then that employer may wish to then consider a redundancy exercise.