This note is current as at 10 am on 2 November 2020
The new Job Support Scheme (“JSS”) was due to commence yesterday, 1 November (summarised in our last briefing). On Friday night, the Government published its long-awaited guidance on the JSS, spanning no less than 9 separate guidance documents.
It was therefore somewhat of a surprise – although not an unwelcome one – when the Prime Minister announced on Saturday that, with England joining Wales in a national lockdown, the Coronavirus Job Retention Scheme (otherwise known as the “Furlough Scheme”) would be extended (and the JSS postponed) for a month.
We have previously reported on the introduction of and subsequent multiple clarifications to the Furlough Scheme, which was originally announced by the UK Government on 20 March 2020 in response to the COVID-19 crisis and extended through July to the end of October 2020. As a reminder, the most recent government guidance document issued on the Furlough Scheme can be found here.
Furlough Scheme extended
The extended Furlough Scheme will run for one month from 1 November (the Government having confirmed that there will be no gap in support between the end of the current Furlough Scheme on 31 October and the start of the extended Furlough Scheme). It will be primarily based on the same rules as the flexible furlough scheme introduced from 1 July 2020, with employees continuing to receive 80% of their current wages up to a maximum of £2,500 (pro rata) for their unworked hours, but with the cost to employers being limited to the employer National Insurance contributions and pension contributions.
Unlike under the JSS, businesses will continue to be paid in advance (rather than in arrears) to cover wage costs, although there will be a short gap when employers will be paid in arrears to allow the legal guidance to catch up with the Government’s announcement.
The key provisions of the extended Furlough Scheme (as available) are as follows.
Which employers are eligible?
Unlike the JSS, all employers, large and small, are eligible for the extended Furlough Scheme, without undertaking any sort of financial impact test.
An employer will be eligible if it has:
- a UK bank account; and
- has a UK PAYE scheme.
Importantly, an employer does not have to have previously taken advantage of the original Furlough Scheme (whether in relation to the particular employee or at all) to qualify for the extended Furlough Scheme.
Publicly funded employers are not expected to utilise the extended Furlough Scheme, unless they are partially funded and their private revenues have been disrupted due to coronavirus.
As with the original Furlough Scheme, we expect that administrators will be able to take advantage of the extended Furlough Scheme, provided that there is some intention to retain the services of the employees of the business in administration (for example, if the business is intended to be sold as a going concern).
Which employees are eligible?
- must have been on their employer’s PAYE payroll before midnight on 30 October 2020, meaning that a real time information (“RTI”) submission must have been made to HMRC for that employee on or before 30 October 2020;
- can be on any type of contract, this includes zero hours and casual contracts; and
- can still work some of their normal hours and be claimed for in respect of their unworked hours.
Accordingly, some very recent joiners may not be covered, but employees who were not previously covered because they had not been furloughed for at least three consecutive weeks between 1 March and 30 June and for the first time by no later than 10 June now will be.
Grants available and employer contribution
For any part of an employee’s usual hours that they are laid off, the Government will pay up to 80% of their wages (subject to an overall cap of £2,500).
As was the case in August, employers will only have to pay employer National Insurance contributions and pension contributions on the employee’s wages while they are furloughed (on average, the Government says, approximately 5% of total employment costs).
Employers can top this up if they wish.
When can claims be made?
The Government has not yet announced when claims can first be made for wage costs incurred during November. More detailed guidance is expected shortly and we will provide a further update once it is available.
Whilst generally it seems that the terms of the original Furlough Scheme will continue to apply, there are still questions we hope and expect the further guidance will address, including:
- What wages will an employer be able to claim for? Under the original Furlough Scheme, grants covered 80% of salaried employees’ wages in their last pay period to 19 March. Will that calculation date now be changed to 30 October? What about employees with variable pay? Previously employers could claim for 80% of their earnings (1) in the same month in the previous year or (2) on average over the 2019/2020 tax year or (3) if they have been employed for less than a year, on average since they started work. Presumably that will remain the case.
- Will it be necessary to enter into a new agreement with employees already on flexible furlough to cover this extended furlough period, or will employers be able to rely on the existing agreement? This may depend on the terms of the existing agreement. Presumably if a new agreement is required it will be possible to backdate it to 1 November, given the Government only announced the extension of the Furlough Scheme on Saturday night - five hours before the extension came into effect.
- Will employers be able to make employees redundant and claim for their notice periods under the extended Furlough Scheme? Presumably so, as employers could do this under the original Furlough Scheme, even though it is not permitted under the JSS.
- Importantly, will employers be able to reinstate those employees it had to make redundant in October in order that those employees can benefit from the extended Furlough Scheme as was the case in March?