Winter of discontent? Furlough Scheme extended until 31 March 2021

United Kingdom

This note is current as at 10am on 6 November 2020

Introduction

On Monday 2 November, we reported on the extension of the Coronavirus Job Retention Scheme (“Furlough Scheme”) for one month, following the Government’s announcement on Saturday 31 October that England would be joining Wales in a national lockdown from 5 November (for that update click here). 

However, in an unexpected further announcement yesterday, the Chancellor Rishi Sunak announced that the Furlough Scheme would now be extended until 31 March 2021, acknowledging that “the economic effects are much longer lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our support”.

The Government also published a policy paper on the extension of the Furlough Scheme yesterday, which can be found here.  It states that detailed guidance is expected to be published on 10 November. 

We have summarised below the additional information that has become available on the extended Furlough Scheme since our last briefing, pending receipt of the full guidance (and, presumably, a new Treasury Direction).

Furlough Scheme extended to 31 March 2021

The extended Furlough Scheme will now run from 1 November 2020 until 31 March 2021 – so to over a year  since its incarnation – with employers able to claim and employees entitled to receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month (pro-rated according to their unworked hours), until at least 31 January 2021. However, the Government has said that it will review the level of support provided in January, and further guidance for claim periods from February onwards will be published following that review.

The policy paper expressly states that this is an extension of the previous Furlough Scheme and the same rules will apply “unless we say otherwise”. 

It also states that HMRC will publish details of employers who make claims under the extended Furlough Scheme, starting from December – no doubt in an attempt to minimise and flush out any fraudulent claims.

The launch of the Job Support Scheme is “postponed”.

Employees on the payroll on 30 October

Consistent with the original statements about the extension of the Furlough Scheme, the policy paper confirms that to be eligible, employees must have been on their employer’s PAYE payroll on 30 October and a real time information (“RTI”) submission must have been made to HMRC for the employee between 20 March and 30 October 2020.

As we previously noted, this means that some very recent joiners may not be covered.

Redundancies and rehiring

One of the main questions raised by employers has been whether employees recently made redundant can be rehired for the purposes of accessing the extended Furlough Scheme.  That question is now answered by the policy paper.  It confirms that – in an apparent exception to the general requirement that employees must have been on their employer’s payroll on 30 October – any employees who were employed and on the payroll on 23 September 2020 but who were made redundant or “stopped working” for their employer after that date (including those on fixed term contracts that had expired) can be “re-employed” and claimed for under the extended Furlough Scheme, provided that the employer had made a RTI submission to HMRC between 20 March 2020 to 23 September 2020 notifying a payment of earnings for the employees.

As was the case under the original Furlough Scheme, employers are under no obligation to re-employ former employees (it is not of course cost neutral to do so), and will need to consider issues such as when employees’ employment should be backdated to, whether continuity of service will be preserved and if so whether they will have unfair dismissal rights when the furlough period is over, and how termination payments already made should be dealt with.

Reference pay

For those previously eligible under the original Furlough Scheme

The policy paper states that in respect of any eligible employees who “were previously furloughed”, employers must use “the same calculations for calculating reference pay and usual hours” as the original Furlough Scheme.  However, the paper also later says this calculation should be used for employees who were “previously eligible … even if a claim was not made in respect of that employee” in respect of the period up to 31 October.

Whilst this is a bit confusing (and exactly what “eligible under the original Furlough Scheme” means is not explained), what is clear is that:

  • for regular employees on a salary who have previously been furloughed, the grant will cover 80% of their salary in their last pay period prior to 19 March 2020 (or 28 February 2020 if this was the date the employer previously used); and
  • for employees whose pay varies who have previously been furloughed, the grant will cover 80% of the higher of (i) the wages earned in the corresponding calendar period in the tax year 2019 to 2020; and (ii) the average wages payable in the tax year 2019 to 2020. 

Usual hours of work for these employees will also be calculated in accordance with the original Furlough Scheme.

For those who were “not eligible” under the original Furlough Scheme 

The policy paper explains that there will be alternative calculations to determine their reference pay and usual hours for employees who were “not eligible” under the original Furlough Scheme and for “new employers claiming and new employees hired between 20 March 2020 and 30 October 2020”.

Full details are promised (and hopefully more clarity will be provided) in the guidance due to be published on 10 November, although the policy paper states that:

  • In relation to reference pay:
    • for employees on a fixed salary, the grant will cover 80% of the wages payable in the last pay period ending on or before 30 October 2020; and
    • for employees whose pay varies, the grant will cover 80% of the average wage payable between (i) the later of the date their employment commenced and 6 April 2020; and (ii) the day before their period of furlough leave under the extended Furlough Scheme begins.
  • In relation to usual hours of work:
    • for employees on fixed hours, whose pay does not vary according to the number of hours they work, usual hours will be the contracted hours worked in the last pay period ending on or before 30 October 2020; and
    • for employees whose hours of work vary, usual hours will be the average hours worked between 6 April 2020 and the day before their period of furlough leave under the extended Furlough Scheme begins.

It would seem therefore that those previously eligible for support under the original Furlough Scheme will not get the benefit of any pay increases (or indeed the disadvantage of any pay decreases) made since March 2020, with those more recently employed potentially entitled to a higher furlough wage than their longstanding colleagues.

Shielding, caring and sickness absence

The policy paper is explicit that under the extended Furlough Scheme employers can furlough employees who are unable to work because they are shielding in line with public health guidance (or need to stay at home with someone who is shielding) as well as employees who have caring responsibilities “resulting from coronavirus”, for example caring for children as a result of school or care provider closures.

It also echoes the original Furlough Scheme (and arguably goes a little bit further) in stating that whilst the scheme is not intended for short-term sickness absences employers who want to furlough staff  “for business reasons” who are currently off sick can do so and “it is up to employers to decide” whether to move employees who become ill,  whether due to coronavirus or an unrelated illness, off furlough and on to Statutory Sick Pay.

Original rules and rights confirmed

The policy paper notes that it remains the case that employees cannot complete any work for their employer that “makes money or provides services for their employer or any organisation linked or associated with their employer” during their unworked furlough hours, although they can still undertake training, volunteer for another organisation and work for another employer subject to their contractual obligations. 

It also confirms that employee rights to annual leave, maternity and parental rights, protection from unfair dismissal, redundancy payments and to receive the National Minimum Wage for hours worked remain in full force and effect, also the extended Furlough Scheme will have no effect on those employees on statutory parental leave and the Working Tax Credits working hours easement will continue to apply for the time being.

Agreement with employees

The policy paper explains in some detail that, as with the original Furlough Scheme, employers will need to discuss any new working arrangements with their staff and make any necessary changes to their employment contract by agreement.  The requirement for the employer to confirm to employees in writing that they have been furloughed (whether flexibly or wholly) remains. If the employee is not informed in writing, the employer will not be eligible for the grant. Records of such agreements need to be retained for five years, with details of hours worked and fully furloughed hours kept for six years.

Importantly, it is confirmed that any flexible or full furlough agreement made retrospectively with effect from 1 November will be valid for the purposes of claiming under the extended Furlough Scheme, although only retrospective agreements entered into up to (and including) 13 November 2020 may be relied upon.

When can claims be made?

Claims can be made from 8am on Wednesday 11 November 2020. Claims must be for a seven-day claim window in advance or in arrears for the period from 1 to 11 November.  

Claims for payments relating to November 2020 have to be made by 14 December 2020, with any claims for subsequent months submitted by the 14th of the following month. 

And finally … what about the Job Retention Bonus?

The Job Retention Bonus will not now be paid in February 2021 as planned.  The policy paper states that as “the purpose of the JRB was to encourage employers to keep people in work until the end of January … the policy intent of the Job Retention Bonus no longer applies”. It does however also say that a retention incentive will still be deployed “at an appropriate time”.