Further guidance has now been issued – please see here for updated details of the extended Coronavirus Job Retention Scheme.
The Chancellor has announced that the Coronavirus Job Retention Scheme (CJRS) will now be extended for all parts of the UK until 31 March 2021.
The CJRS was due to end on 31 October 2020, before the Chancellor announced an initial extension until 2 December 2020, when the government is expected to lift the second national restrictions introduced on 5 November 2020. The Chancellor has now announced a further extension of the CJRS, recognising that, “the economic effects are much longer lasting for businesses and areas than the duration of any restrictions.”
Extended CJRS: what is known so far
Employers will retain the option of furloughing employees on a full-time or flexible basis (where employees work some but not all of their contractual hours).
Under the extended CJRS, furloughed employees will receive 80% of their usual wages for any hours not worked, up to a maximum of £2,500 per month (proportional to hours not worked).
Employers will only be required to pay National Insurance Contributions and pension contributions, making the extended CJRS more generous than the previous version of the CJRS as it applied in October 2020 (when employers were also required to contribute 20% of the employee’s salary). Employers can choose to “top up” employee wages at their own expense. The government will review the CJRS in January 2021, “to decide whether economic circumstances are improving enough to ask employers to contribute more.”
To claim a grant under the extended CJRS, employers do not need to have previously submitted a claim under the CJRS. Employers across the UK can claim, whether their businesses are open or closed.
Helpfully, employers will also be able to claim a grant in respect of employees who have not previously been furloughed under the CJRS, provided that the employee was employed and on the employer’s payroll on 30 October 2020 (and the employer has made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee).
The amount of grant that employers can claim
The previous CJRS calculations in respect of “usual wages” and “usual hours” will apply to all employees who were eligible under the CJRS, even if a claim was not made in respect of that employee before 1 November 2020.
Where an employee was not previously eligible under the CJRS, the calculation of 80% wages will take account of updated reference periods. This means, for employees on a fixed salary, the 80% of wages is calculated on the basis of the wages payable to that employee in the last pay period ending on or before 30 October 2020. For employees with variable pay, the 80% is calculated on the basis of their average pay between the start date of their employment or 6 April 2020 (whichever is later) and the day before their furlough under the extended CJRS begins.
The calculation of usual hours also varies for those employees who were not previously eligible under the CJRS. For those with fixed hours and pay, their “usual hours” will be the contracted hours worked in the last pay period ending on or before 30 October 2020. For those employees with variable hours, their “usual hours” will be the average hours worked between the start date of the 2020/ 2021 tax year and the day before their furlough under the CJRS extension begins.
We will need to await the guidance expected on 10 November 2020 to fully understand which calculations apply to particular groups of employees.
We are also awaiting clarification in terms of calculating hours and wages where an employee has been receiving less than their usual contractual pay during the relevant reference period. (For example, where they had been temporarily laid off or had agreed to a temporary reduction in pay). The previous version of CJRS focussed on the employee’s hours and wages prior to the first national lockdown (the last pay period ending on or before 19 March 2020), when employees were generally still receiving their usual contractual pay. We will have to wait and see what approach the government takes in relation to the extended CJRS.
Employees who were employed by their employer on 23 September 2020 (and in respect of whom the employer has made a PAYE RTI submission to HMRC between 20 March 2020 and 23 September 2020) and who were subsequently made redundant or stopped working, may be re-hired and then furloughed under the extended CJRS.
Although this sounds helpful in principle, re-hiring in these circumstances is fraught with practical and legal difficulties for employers. For example, if employers have already undertaken collective consultation, notified the Secretary of State and paid for notice periods and paid statutory redundancy pay, it is unclear which of these will need to be repeated if an employee is re-hired and then made redundant again.
Retrospective agreements must be in place before 14 November 2020
To be eligible for a grant under the extended CJRS, employers must reach agreement with their employee and confirm to the employee in writing that they have been furloughed or flexibly furloughed. Employers may make this agreement retrospectively, to take effect from 1 November 2020. This is helpful, given that full details of the extended CJRS will not be published until 10 November 2020. However, only retrospective agreements put in place before 14 November 2020 may be relied on for the purposes of a CJRS claim. This gives employers at best only three working days from publication of full details of the extended CJRS to the deadline for reaching a retrospective agreement with their employees.
Claims may be submitted under the extended CJRS from 8am on 11 November 2020. All claims made in respect of November 2020 must be submitted by no later than 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month.
Employers’ names to be made public
From December 2020, HMRC will publish details of employers who make claims under the extended scheme so employers should consider if this may give rise to any reputational issues.
Detailed guidance to follow
Detailed guidance on the extended CJRS is expected to be published on 10 November 2020.
Job Support Scheme postponed
The Job Support Scheme (JSS) will not be introduced until after the CJRS ends. The JSS was expected to apply from 1 November 2020, and many employers had already agreed a “temporary working agreement” under the JSS with eligible employees to take effect on that date. Given that the introduction of the JSS has now been postponed, and that the extended CJRS is more generous from both an employer and employee perspective, we expect that employers will seek to move their employees from a “temporary working agreement” under the JSS to a “furlough agreement” under the CJRS. In most cases, this will involve further changes to the employee’s contract of employment.
Employees serving notice
Employers were not permitted to claim under the JSS in respect of an employee who was made redundant or serving their notice. Under the previous version of the CJRS (that which applied in October 2020), an employer could claim a grant in respect of an employee serving their notice. We await clarification as to whether this will also apply under the extended CJRS. If employers are again able to claim in respect of employees who are serving their notice, we are likely to see employers seeking to minimise their wage costs by furloughing employees during their notice period. We may also see employers extending the notice period of those employees whose employment was due to terminate before or shortly after the end of the extended CJRS.
Employers whose businesses remain open were only able to claim under the JSS in respect of employees for whom they could provide at least 20% of their usual working hours. This may have prompted some employers to dismiss or serve notice of termination on any employees for whom there was less work. There is no minimum hours requirement under the extended CJRS: employees may be furloughed on a full-time basis and carry out no work. In view of this, some employers may seek to revoke notices to dismiss and instead furlough those same employees on a full-time basis. We recommend that employers take advice before doing so.
Job Retention Bonus will not be paid
The Chancellor has confirmed that the Job Retention Bonus (JRB) will not be paid in February 2021. The purpose of the JRB was to encourage employers to keep people in work until the end of January 2021. However, given that the CJRS is being extended until the end of March 2021, the government’s view is that the policy intent of the JRB no longer applies: employers now have the option to furlough employees under the CJRS.
In place of the JRB, the government will redeploy a “retention incentive at the appropriate time”. No further details are provided as to what this incentive may entail and when it will be introduced.