01 June, 2020
On 12 May 2020, the Chancellor announced that the CJRS (the Scheme) was extended until the end of October 2020, but that the Scheme would continue in the normal way up until 31 July 2020.
The Chancellor proposed that from August 2020, employers would be required to share the proportion of the wage costs under the Scheme and that part-time furloughed working would also be introduced to help support workforce transition back to work.
Further details were to be announced by the end of month which were confirmed last Friday evening together with updates to the Self-Employment Support Scheme.
The operation of the Scheme from now until 31 October 2020:
June & July 2020:
The Scheme will continue in its current form until the end of July 2020. Employers can continue to claim 80% of pay (capped at £2,500 per month) plus NI and the minimum pension contributions for those furloughed staff who were on the employer's PAYE payroll on 19 March 2020.
It is important to note that employers are responsible for any enhanced pension contributions throughout.
Employers will only be required to pay NI and the pension contributions. The Scheme will maintain the 80% contributions. These employer contributions will therefore be on average 5% of the average gross employment costs that the employer would have ordinarily incurred for each employee.
Employers will be required to pay 10% and NI and pension contributions while the Scheme will contribute the remaining 70% (up to a cap of £2,190.00). These employer contributions will therefore be on average 14% of the average gross employment costs that the employer would have ordinarily incurred for each employee.
Employers will be required to pay 20% and NI and pension contributions and the Scheme will contribute the remaining 60% (up to a cap of £1,875.00). These employer contributions will therefore be on average 23% of the average gross employment costs that the employer would have ordinarily incurred for each employee.
The Scheme will have ended and therefore employers will be required to pay 100% of the employees pay along with NI and pension contributions.
Employer contributions from August to October will apply across all sectors.
Cut-off date for furlough applications
Employers will be prohibited in registering any new eligible staff for furlough from 30 June 2020 under the Scheme. The final date to furlough will be on 10 June 2020 in line with minimum furlough requirements.
Part time furloughed working will be permitted from 1 July 2020, a month earlier than anticipated. The flexibility of the Scheme means that employers can decide on working arrangements (shift patterns and the hours worked).
Employers are required to pay for the days/hours an employee worked whilst claiming the furlough hours under the Scheme.
Advice to Employers
It is imperative that the rules of the Scheme are complied with and proper records kept to ensure employers who have furloughed eligible staff are able to claim back wage costs and, ultimately, avoid investigation by HMRC into a potential misuse of the System. Where improper claims are found, HMRC will seek recovery of the grant received.
Employers should take a proactive approach - if they haven't done so already - considerations and planning will need to be undertaken on how part-time working is proposed and implemented with staff before July 2020.
In addition to the above, employers should, as part of their business continuity plans, analyse the number of workforce currently in place to make sure they are able to pay for part-time furloughed working and/or will be in a position to make the required contributions when they come into effect. This will help in assessing whether staff can be retained without making any redundancies.
One thing to note about the changes is that it applies to all sectors. Therefore, for organisations which are unlikely to see a return to normal levels of business any time soon, such as organisations within the hospitality sector, then it unfortunately seems inevitable that redundancies will need to take place.
If inevitable redundancies are to follow, for instance before employer contributions come into play in August 2020 or before the phasing out of the Scheme, employers should be mindful of the minimum consultation periods relating to collective redundancies. Irrespective of the anticipated redundancies, it is important that employers follow a fair and reasonable redundancy process before redundancies are confirmed.
If you have any queries arising as a result of this briefing, or require any advice on the Scheme changes, please do not hesitate to get in touch with the Employment Team at Forbes Solicitors.