What does the extension of the furlough scheme mean for businesses and employees?

Covid-19 | Covid-19 Advice | Covid-19 News | Economy & Politics | Employment & Skills
Laura Kearsley

Prime Minister Boris Johnson has announced that England would enter renewed lockdown restrictions from Thursday 5 November until Wednesday 2 December to try and combat the rise in Covid-19 cases.

It was also confirmed that the Coronavirus Job Retention Scheme (CJRS) or ‘furlough scheme’, which was originally due to end on 31 October, would be extended through November. As a result, the Job Support Scheme (JSS), which was due to come into force on 1 November, has been postponed until the CJRS ends.

Laura Kearsley, partner and solicitor specialising in employment at Nelsons, outlines how the CJRS will operate throughout November.

She comments: “The CJRS was first introduced on 23 March 2020 with the aim of providing support to employers whose operations had been severely affected by the coronavirus pandemic. It enabled employers to recover 80% of wage costs for employees placed on furlough – up to a monthly limit of £2,500 per employee.

“It was an entirely new concept and introduced a new type of temporary leave for employees, where the government reimbursed the employer for wage costs instead of staff being made redundant.

“After a number of extensions, the government announced that it would wind down the CJRS gradually between 1 August and 31 October, when it was due to end completely. However, following to the Prime Minister’s announcement, that is no longer the case.”

How will the extended CJRS operate?

“From 1 November, the level of financial support available to businesses under the extended CJRS is the same that was available under the furlough scheme in August. The government will pay 80% of wages and employers will pay National Insurance contributions (NICs) and pension contributions.

“The extended CJRS is available regardless of whether the employer or employee has previously used the furlough scheme and covers staff who were on the employer’s PAYE payroll at 11:59pm on Friday 30 October.”

What are the rules of the extended CJRS?

“There are a number of measures and requirements business owners need to be aware of, including:

• Businesses can claim in respect of the hours that their employees are not working;
• Employers can claim for a minimum period of seven consecutive calendar days;
• For hours not worked, the government will pay 80% of wages;
• For worked hours, employers must pay their employees as normal;
• As previously under the CJRS, employers can choose to top-up their employees’ wages at their own expense;
• All employers are eligible to claim as long as they have a PAYE payroll scheme, enrolled for PAYE online and a UK bank account;
• All employees paid via PAYE can be furloughed as long as they were on the payroll at 11:59pm on 30 October 2020 and on any type of contract – including apprentices, full-time, part-time and zero hours;
• Employees on fixed term contracts and individuals who are not employees but paid via PAYE (i.e. company directors or agency workers) can also be furloughed.

“The government will confirm when claims under the extended CJRS can be made. There will be no gap in eligibility for support between the previously announced end-date of furlough leave and this extension.”

What about flexible furlough?

“The government introduced a more flexible form of furlough on 1 July, whereby employers could agree more flexible working arrangements with furloughed employees. For example, employers and employees could agree a return to work on a part-time basis to suit the needs of the business.

“Under flexible furlough, employers were required to pay employees in full for any time spent working and would be responsible for tax and NICs on those payments. Employers could not reclaim under the CJRS for payments made in respect of time spent working but could reclaim under the CJRS for employees’ ‘normal’ hours that weren’t worked.

“When claiming under the CJRS, employers have to report on hours worked and the usual hours an employee was expected to work in a claim period.”

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