COVID-19 Update – 11 November – A Guide to the Extended Job Retention Scheme

On 5 November 2020, it was announced that the Coronavirus Job Retention Scheme (CJRS) was to be extended to 31 March 2021. Generally known as ‘furlough’, an employee can take a period of temporary leave and the Government may cover 80% of their wages up to £2,500 per employee per month.

How does the extended scheme work?

Like previously, you have an agreement with your employee to place them on a period of ‘furlough’. This is an alternative to making staff redundant. You can place your staff on ‘full-furlough’, meaning they do not work at all, or ‘flexible-furlough’, where they work less hours than usual.

From 1 November up to 31 January 2021, the government pays 80% of their wages, up to a cap of £2,500 per employee per month. You do not have to top up their wage, meaning that if the employee is placed on ‘full-furlough’ and does no work for you, all you will need to pay is Employer NICs and pension contributions. If you place an employee on ‘flexible-furlough’, you will need to pay them in full for the time they work, as well as the full employer NICs and pension contributions. There will be a review of the rules in January 2021.

What happened to the Job Support Scheme?

The Job Support Scheme (JSS) was expected to launch on 1 November, following the closure of the CJRS. However, as a result of lockdown restrictions, the CJRS has been extended and the JSS postponed indefinitely.

Which companies are eligible to use the scheme?

All employers with a UK bank account and UK Pay As You Earn (PAYE) scheme can claim the grant. You do not need to have previously claimed for an employee before the 30 October 2020 to claim for periods from 1 November 2020.

Which employees are eligible for the scheme?

You can claim for employees on any type of employment contract (full-time, part-time, agency, flexible or zero-hour contracts) including company directors, and salaried members of Limited Liability Partnerships (LLPs).

To be eligible to be claimed for under this extension, employees must be on your PAYE payroll and a Real-Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 23:59 on 30 October 2020.

How do you place an employee on furlough?

You should discuss the situation with them that you are designating them as a furloughed worker. This is a contractual change to their contract of employment, therefore you should have a written agreement in place to confirm they are on ‘full’ or ‘flexible’ furlough, and make them aware of their working obligations and pay levels. You should keep a written record of the agreement, and records of how many hours your employees work and the number of hours they are furloughed (that is, not working), for 6 years.

How does annual leave work for furloughed employees?

Annual leave will operate in the same way as under previous furlough rules. Employees will continue to accrue annual leave during furlough. Should an employee take annual leave during furlough, you will need to top up holiday pay for them so they receive full pay.

If an employee if flexibly furloughed then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours.

Employees should not be placed on furlough for a period simply because they are on holiday for that period.

How do you calculate furlough pay?

For employees that meet the eligibility criteria, and were previously furloughed, employers must use the same calculations for calculating reference pay and usual hours.

For an employee who meets the criteria of the extended scheme but was not previously eligible for the CJRS, the alternative calculations or ‘reference pay’ and ‘usual hours’ must be used. For all other employees, employers must use the CJRS calculations for calculating reference pay and usual hours.

The ‘reference pay’ for employees not previously eligible for CJRS must be calculated as follow:

• On a fixed salary – 80% of the wages payable in the last pay period ending on or before 30 October 2020
• Whose pay varies – 80% of the average payable between (these dates are inclusive) the start date of their employment or 6 April 2020 (whichever is later) and the day before their CJRS furlough period begins.

80% of the wages is are capped at the maximum wage amount, being £2,500 per month.

Can you furlough employees on sick leave or if they are ‘shielding’?

Employees can be furloughed where they are unable to work because they:

• Are shielding in line with public health guidance (or need to stay at home with someone who is shielding)
• Have caring responsibilities resulting from coronavirus, including employees that need to look after children.

The CJRS is not intended for short-term sick absences. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees.

Employers can furlough employees who are clinically extremely vulnerable, at the highest risk of severe illness from coronavirus or off on long-term sick leave. It is up to employers to decide whether to furlough these employees.

You can claim back from both the CJRS and the SSP rebate scheme for the same employee but not for the same period of time. When an employee is on furlough, you can only reclaim expenditure through the CJRS, and not the SSP rebate scheme. If a non-furloughed employee becomes ill due to coronavirus, needs to self-isolate or shield, then you might qualify for the SSP rebate scheme, where you can claim up to two weeks of SSP per employee.

Furloughed employees who become ill, due to coronavirus or any other cause, must be paid at least Statutory Sick Pay (SSP). As under the CJRS previously, it is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate.

What if your employee becomes sick while furloughed?

Furloughed employees retain their statutory rights, including their right to SSP. This means that furloughed employees who become ill, due to Coronavirus or any other cause, must be paid at least SSP. Subject to eligibility.

Can employees do any work during furlough?

As under the CJRS previously, during hours which employees are recorded as being on furlough, they cannot do any work for their employer that makes money or provides services for their employer or any organisation linked or associated with their employer.

Employees can:

• Take part in training
• Volunteer for another employer or organisation
• Work for another employer (if contractually allowed)

Can you re-hire employees to put them on furlough?

Employees that were employed and on the payroll on 23 September 2020 who were made redundant or stopped working for their employer afterwards can be re-employed and claimed for. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.

Similarly, an employee who was on a fixed-term contract, on payroll on 23 September, and that contract expired after 23 September can be re-employed and claimed for, provided that the other eligibility criteria are met.

Can you claim furlough wages for an employee during a notice period for redundancy?

Where you must make redundancies, you should do so in accordance with the normal rules. This includes giving a notice period and consulting staff before a final decision is reached. You can continue to claim for a furloughed employee who is serving statutory notice period however, grants cannot be used to substitute redundancy payments.

The government is reviewing whether employers should be eligible to claim for employees serving contractual or statutory notice periods and will change the approach for claim periods starting on or after 1 December 2020, with further guidance published in late November 2020.

If you make an employee redundant, you should base statutory redundancy and statutory notice pay on their normal wage rather than the reduced furlough wage.

How do I claim the grant?

The closing date for claims up to and including 31 October remains 30 November 2020, using the existing CJRS guidance.

The extended CJRS will operate as the previous scheme did, in several respects:

• Employers must report and claim for a minimum period of 7 consecutive calendar days, and for employees on ‘flexible furlough’, employers will need to report actual hours worked and the usual hours an employee would be expected to work in a claim period
• The claim period must start and end within the same calendar month: if the pay period includes days in more than more month, separate claims will need to be submitted covering the days that fall into each month. Each of those claims will need to be calculated separately. Claim periods cannot overlap, and employees claimed for will need to be included in each separate claim made.
• Claims relating to November 2020 must be made by 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month. Monthly payrolls where their pay period combines two calendar months, and four-weekly payrolls, in particular, may need to plan very carefully to ensure they meet this deadline.

HMRC will make employer claim information public

From December 2020, HMRC will publish employer names for companies and Limited Liability Partnerships (LLPs), and the company registration number of those who have made claims under the scheme for the month of December onwards.

If you need any further support, please contact the payroll team on 01522 531341 or at payroll@wrightvigar.co.uk