On 12 June 2020, the government published new and updated guidance on its Coronavirus Job Retention Scheme (CJRS), implementing changes that were first announced by the Chancellor Rishi Sunak in late May.
We summarise the latest changes and consider their implications and consequences below.
With effect from 1 July 2020, employers will be able to furlough staff flexibly, meaning that it is no longer an “all or nothing” option. Employees will be able to perform some part-time work without the employer losing eligibility to receive government support under the CJRS.
Under the new flexible furlough option employees could, for example, work for 50% of their normal hours in a week (during which they should receive their normal pay, reflecting any temporary salary reductions that may apply) and then remain on furlough for the remaining 50% of their normal hours (during which the employer will be able to claim under the CJRS at the relevant rates – discussed further below).
Further, the three week minimum period of furlough has been removed, meaning that employees could be rotated on an off furlough over shorter reference periods if desired.
However, it should be remembered that employees must have been furloughed for a consecutive period of at least three weeks before 30 June 2020 in order for the employer to be able to claim under the CJRS after 1 July. In practice therefore, employees must have first been placed on furlough on or before 10 June 2020.
If an employer wishes to furlough an employee flexibly, this must be agreed in writing with the employee and a record of this agreement must be kept by the employer for six years. It is not clear precisely what the written agreement must record but we would recommend that it is as detailed as possible – certainly covering the period of furlough and which of the employee’s normal hours will and will not be worked.
The government support available to employers in the period from 1 July to the closure of the CJRS on 31 October 2020 will reduce over time as follows:
- from 1 August 2020, employers will no longer be able to claim for the cost of employer national insurance contributions or the employer’s auto-enrolment pension contributions from the CJRS. They will be required to bear this cost themselves;
- from 1 September 2020, employers will only be able to claim up to 70% of the employee’s wage costs for furloughed hours;
- from 1 October 2020, employers will only be able to reclaim up to 60% of the employee’s wage costs for furloughed hours; and
- the CJRS will close entirely on 31 October 2020.
Despite the tapering support offered by the CJRS set out above, employees remain entitled to receive up to 80% of their pay (up to £2,500 per month) when furloughed meaning that employers are forced to share the employee wage costs with the government - albeit still at a relatively low rate.
As mentioned above, from 1 July 2020 employers will only be able to claim under the CJRS for employees who have previously been furloughed for at least three consecutive weeks between 1 March and 30 June 2020. However, an important exception in this regard that is clarified in the latest guidance relates to employees that have returned from maternity or other family leave after 10 June – who it will still be possible to furlough under the amended scheme.
Other than the exceptions for employee returning from family leave, employers cannot claim for more employees after 1 July than they claimed for in a previous claim; effectively the CJRS has been closed to new employees. This means that if an employer had 20 furloughed employees in March, 30 in April and 20 in May the maximum amount of employees they would be able to furlough in any claim from 1 July 2020 is 30.
Claiming under the CJRS
The way that claims are made under the CJRS will change from 1 July 2020 with all claims having to start and end in the same calendar month. Claims must run for a minimum of seven days - a reduction from the previous minimum of three weeks.
The cap on the grant claimed by an employer under the CJRS (80% of wages up to £2,500 per month) will be pro-rated to any normal hours not worked by the employee in the relevant period. For example, if an employee works 50% of their normal hours during a month, the employer will be able to claim only 40% (50% of the usual 80%) of the employee’s monthly wage from the CJRS – capped at £1,250 (50% of £2,500).
The calculation of the amount of grant that the employer can claim for flexibly furloughed employees is complex. The government has set out a number of worked examples and has updated its guidance on calculating claims in an effort to guide employers through the new rules.
The calculation to be performed requires employers to compare an employee’s “usual hours” against the actual hours worked during the claim period. Calculating usual hours can become very complicated when employees do not have fixed contractual hours, and for those whose hours vary.
Claims for employees with fixed hours will be based on a comparison of actual hours worked against the number of hours worked in the pay period before 19 March 2020. Claims for employees who have variable hours will be based on the higher of either the average number of hours worked in the tax year 2019 -2020, or the corresponding calendar period in 2019-2020.
Employers are required to keep written records of their calculations, the usual hours worked by each employee and the actual hours worked while employees were flexibly furloughed for six years. The calculations that employers will be required to carry out will necessarily depend on their employee population and how regular their hours are - we recommend that advice is taken on any specific queries that arise on calculations given how detailed and complex the rules are.
What can we expect next?
The second phase of the CJRS that will apply from 1 July 2020 is intended to provide a soft wind down of government support and to encourage the economy to restart, with the aim of employers being able to sustainably reopen their businesses and to eventually bring all staff back to work. It seems very unlikely that any material employee support will be made available after 31 October 2020 – certainly all indications to date are that this shall be a hard end to the support provided over recent months.
We anticipate that the winding down and closure of the CJRS and associated kickstart of the UK economy will present new HR challenges in the coming months:
- planning for the safe return to the workplace – which employees shall be required to return first and what social distancing and other measures can be introduced to protect the safety and wellbeing of staff and customers?; and
- redundancy and restructure exercises that have been postponed during the period of CJRS support will presumably be started. Employers will face many problems in preparing for and completing such process – for example we anticipate that it will be very difficult to predict the level of customer demand and so expected work levels for many months yet, with the full effects of Covid-19 and the associated lockdown, as well as customer behaviour once it ends, still not fully known. If large numbers of employees are currently on furlough and will remain so during redundancy consultation exercises, it is also likely that there will be challenges in co-ordinating and arranging meetings with management and the affected employees.
Please get in touch with any of the authors of this article, or your usual Fladgate contact, if it would be helpful to discuss these themes or others in the context of any issues that you might be facing.