Coronavirus Job Retention Scheme from 1 November 2020 to 30 April 2021

Following on from the Chancellor’s announcement on 5 November 2020 that the Coronavirus Job Retention Scheme (CJRS) would be extended, the government published a set of guidance notes (Guidance) providing more detail.  It also published a further Treasury Direction which underpins the extended CJRS until 31 January 2021.  On 17 December 2020 the Chancellor announced that the CJRS would be extended until 30 April 2021.   Another Treasury Direction and updated guidance for the period from 1 February 2021 are awaited.

Overview of the Scheme

• The extended scheme is to support businesses that “cannot maintain” their workforce because their operations have been affected by coronavirus.
• It will remain open until 30 April 2021.
• For claim periods running to April 2021 employees will receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month (the cap is proportional to the hours not worked).
• Employees who were on the payroll on 23 September 2020, but who left after that, can be re-employed and claimed for.
• The job retention bonus scheme is formally withdrawn by the fourth Treasury Direction. The Guidance states that a “retention incentive” will be deployed at the “appropriate time”. More details are to follow, but it is anticipated that some form of retention bonus will be paid in the months after CJRS ends.
• Employers will need to pay National Insurance Contributions and employer pension contributions on grant monies, as well as on any hours worked as normal.
• The Guidance indicates that for claim periods relating to November 2020 employers can continue to claim for a furloughed employee who is serving notice. It is, however, clear that grants cannot be used to subsidise redundancy payments. 
• For claim periods on or after 1 December 2020 it is no longer possible to claim for any days during which a furloughed employee is serving a contractual or statutory notice period for the employer which includes people serving notice of retirement or resignation.
• From February 2021, HMRC will publish a notice on gov.uk the names of employers who have claimed under the CJRS for December 2020 onwards together with the amount they have claimed within a banded range set out in the Guidance except where to do so would expose those working for the employer to “serious risk of violence or intimidation”.

Who can claim?

• Employers do not need to have used the CJRS previously.
• Employers across the UK can claim, whether they are open or closed.
• Employers who have staff costs that are publicly funded should use that money to continue paying staff, and not furlough them. Organisations that are partially publicly funded should contact their sponsor department for further guidance.

Who can be furloughed?

• Employers can claim for employees on their PAYE payroll on 30 October 2020. A PAYE Real Time Information submission must have been made for that employee between 20 March 2020 and 30 October 2020.
• Furlough can be flexible, on a full or part time basis.
• For employees previously claimed for under the CJRS, the same calculation for reference pay and usual hours should be used.
• For employees not previously furloughed, there are alternative calculations of reference pay and usual hours to be used (see below).

Who cannot be furloughed?

• Employees hired after 30 October 2020.
• Employees on the two weeks compulsory maternity leave after birth.
• The self-employed (for whom a separate scheme applies) including a limb (b) worker who is not paid through PAYE.

What furloughed workers can and cannot do

Furloughed workers can:

• Take part in volunteer work.
• Undertake training. However, if they are required to complete training whilst furloughed, they must be paid at least NMW/NLW for time spent training, even if this is more than 80% of their wage that will be subsidised.
• Continue working in a second job they already have.
• If their employment contract permits, take on a new job, provided they are able to return to the employer as soon as furlough ends and also to participate in any training needs of the original employer.

Furloughed workers cannot:

• Do any work which provides services or generates income for the organisation which has furloughed them, or any linked organisation during their furlough hours.
• This does not prevent them working under flexible furlough arrangements provided they are not working during their furloughed hours.

Agreeing furloughed and flexibly furloughed status

• Changing the status of employees to exclude them from work and reduce remuneration remains subject to existing employment law. Employers should discuss this with their staff and make any changes to the employment contract by agreement, or in accordance with any valid right to vary under the contract.
• The Guidance provides that employers must have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed. The employee does not have to provide a written response (although this would clearly be helpful to evidence their agreement).
• If 20 or more staff are being furloughed at one establishment, it may be necessary to engage in a collective consultation process to procure agreement to changes to their contractual terms.
• Any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of a claim. Only retrospective agreements put in place up to and including 13 November may be relied on for the purposes of a CJRS claim.   
• All other furlough agreements must be made before the start of the period to which the claim relates but may subsequently be varied to reflect any variation agreed between the employer and employee during that period.
• In practice, in current circumstances, most employees are likely to agree to accept furlough leave in any event.
• The flexible agreement can last any amount of time and the flexible furlough arrangement can be agreed more than once i.e. it is possible to rotate. Although the arrangement can last any amount of time, the minimum period it is possible to claim for is 7 consecutive calendar days.
• A written record of the agreement must be kept for 5 years.
• Employers must also keep records of how many hours their employees work and the number of hours they are furloughed for 6 years.

How 80% of wages costs is calculated

• For those on the earlier CJRS, the same calculations apply. Please see our previous CJRS briefing for further details.
• For those not previously eligible, 80% of wages is calculated:
  • On a fixed salary – 80% of wages payable in the last period before 30 October 2020.
  • Variable pay – 80% of the average payable between the start of their employment or 6 April 2020 (whichever is later) and the day before the CJRS extension furlough period begins.
• The previous cap (£2,500) applies to all calculations.
• Usual hours are calculated:
  • Fixed hours – the contracted hours in the last pay period ending 30 October 2020.
  • Variable hours – an average of hours worked between the start date (or 6 April 2020, whichever is later), and the day before the CJRS extension furlough period begins.
• There are detailed examples in the calculation guidance.

Making the claim and the claim period

• Employers must report and claim for a minimum period of 7 consecutive calendar days.
• Employers must report actual hours worked, and the usual hours an employee would have worked in the claim period.
• For hours worked, employees will be paid by their employer subject to their employment contract and the employer will be responsible for paying the tax and NICs due on those amounts.
• The claim period must start and end in the same calendar month and cannot overlap.
• The claim can be made in anticipation of a payroll run, at the point of payroll or after payroll has been run.
• Claims relating to November 2020 must be made by 14 December 2020, with subsequent claims being made by day 14 of the following month.
• Information about the furloughed workers and their earnings must be submitted to HMRC through the online portal.  
• When claiming for employees who are flexibly furloughed, the employer should not claim until it is sure of the exact number of hours they will have worked during the claim period.
• If an employer overclaims under the CJRS, they have 90 days from receipt of the grant to notify HMRC of the error.

Holidays

The Guidance follows earlier guidance on holidays, namely:

• The Guidance makes clear that holiday continues to accrue during furlough, and employees can take leave whilst on furlough. If an employee is flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours, rather than working hours. Employees who have not been furloughed, however, should not be placed on furlough for a period simply because they are on holiday for that period.
• The Guidance says that holiday pay should be “at your normal rate of pay” calculated in accordance with the Working Time Regulations 1998 (the WTR). Employers are obliged to top up the Scheme payments to usual pay.
• What amounts to “normal rate of pay” may vary depending on whether permanent contractual pay reductions have been agreed, or whether the pay variation is only for the duration of the Scheme.
• The government has also amended the WTR to allow the carry-over of up to four weeks’ (rather than the full 5.6 weeks) statutory leave for the next two leave years, where it is not reasonably practicable for employees to take some or all of their holiday entitlement due to coronavirus.

Employees whose health has been affected and those with caring responsibilities

The Guidance follows earlier guidance on ill health, namely:

• Employees can be furloughed where they are unable to work because they are clinically extremely vulnerably or at the highest risk of severe illness from coronavirus and following public health guidance; or if they have caring responsibilities resulting from coronavirus, including employees that need to look after children who are at home as a result of school and childcare facilities closing, or caring for a vulnerable individual in their household.
• The CJRS is not intended for short term sickness absence, but employers can, for business reasons, furlough employees that are currently off sick. 
• The Guidance states that if an employee is on sick leave or self-isolating as a result of coronavirus, they may be able to get SSP, subject to the usual eligibility requirements.    
• The Guidance states that it is up to employers to decide whether to move employees who have been furloughed and become sick onto SSP, or keep them on furlough at their furloughed rate. If a furloughed employee moves onto SSP employers can no longer claim for their furloughed salary. In most cases, the reality is that someone on furlough leave is unlikely to tell their employer they are sick as the payments while being furloughed are likely to be substantially more than SSP.
• Sickness while on furlough leave is more likely to be an issue if the employer has a generous contractual sick pay scheme where there is the incentive to notify the employer. It seems clear that a furloughed employee who is moved onto sick pay provisions cannot be claimed for through the Scheme. One option to ensure this does not become an issue would be for the employer to provide in the furlough, or flexible furlough, agreement that enhanced sick pay does not apply during furlough leave.

In conclusion

• Employers are well-advised to monitor the guidance from the government as this is being regularly updated and changed.
• Aside from the rapidly evolving legal position, effective communication and transparency are key for all employers when implementing a period of furlough. Open discussion, pragmatic solutions and preferably fully documented agreement will be critical in using the CJRS to save businesses and reduce the risk of claims.

For more information, please contact Michael Powner or your usual Charles Russell Speechlys contact.