In light of the Prime Minister’s announcement on 31 October that England was to enter a second period of lockdown from 5 November until (at least) 2 December, the UK government announced that the Coronavirus Job Retention Scheme (known as the “CJRS” or “furlough” scheme) was to be extended beyond its planned end date of 31 October.
On that date the public was told that the extension was to cover only the one month of lockdown. However, less than one week on, the government has now announced that the furlough scheme will remain in place for a further five months, until March 2021.
Whilst this does not bode well for those who hope the lockdown will end on 2 December without any extension, the UK Treasury’s rationale for the significant lengthening of the furlough scheme is not in anticipation of extra restrictions. Rather, because the lockdown has long-lasting economic effects on businesses which will in most cases continue for months after the end of lockdown, the furlough scheme needs to accommodate this: employers may well not be able to return their staff to full working duties in the immediate weeks following lockdown.
The Treasury had previously planned to replace the furlough scheme with a new (and slightly less generous) Job Support Scheme on and from 1 November. However, the extension of the furlough scheme – and a greater level of support to businesses and employees through another period of lockdown in England and beyond – now seems to have ensured that this scheme will be scrapped.
These new development mean, in summary:
- The recently announced extension means the furlough scheme will continue until March 2021, although the terms will be reviewed in January, which may yield a reduction in the amount contributed by the government.
- Until (at least) the end of January 2021, the government will pay up to 80% of an employee’s normal pay for hours not worked, up to a limit of £2,500. This is as generous as the original furlough scheme introduced in March, despite the salary coverage having been reduced over the two months prior to the original end date of 31 October.
- Employers are able to top up employee wages above the government’s limit should they choose to do so and will continue to be responsible for pension and national insurance contributions.
- Any firm in the UK can claim, whether or not their business is open or close, and they do not need to have used the furlough scheme previously.
- The extended furlough scheme is available to employees who were on the payroll on 23 September 2020 (meaning that employees made redundant in October can be brought back in order to be placed on furlough), provided that a “Real Time Information” submission notifying to HMRC payment of that employee’s salary had been made sometime on or before 30 October. Employees do not need to have been put on furlough previously in order to be placed on furlough this time around.
- Whereas from the beginning of July employees needed to have stopped work for three consecutive weeks, there is no such requirement under the extended furlough scheme. “Flexi-furlough” will continue to be available, meaning that employees can work part-time and their employers can claim a furlough grant for their remaining unworked hours, calculated by reference to their usual hours worked.
Businesses will be paid upfront to cover the cost of wages. However, the government has acknowledged that there will be a short period where the legislation governing the furlough scheme is updated, and businesses may need to be paid in arrears for their wage costs during that period.
If you have any questions about these issues in relation to your own organisation, please contact a member of the team or speak to your usual Fox Williams contact.