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04 November 2020
Prime Minister Boris Johnson has announced that the Coronavirus Job Retention Scheme (the furlough scheme) will be extended rather than closed as originally planned. The extension will cover a new lockdown in England, which is expected to come into force on 5 November 2020 and last until 2 December 2020.
The furlough scheme was originally planned to end on 31 October 2020, with the replacement Job Support Scheme (JSS) set to launch immediately on 1 November 2020. However, in a last-minute change of plan, the prime minister announced that the furlough scheme will be extended, having previously resisted calls for such an extension. Further details and guidance are expected, but this article summarises the immediate questions and implications for employers and provides possible wordings that they can use to inform employees of the changes.
To avoid having two schemes running simultaneously, the JSS has been delayed and will now launch when the new furlough extension ends.
The extended furlough scheme will continue until the English lockdown restrictions are lifted in December 2020. It is unclear when the furlough scheme will now end, but the lockdown restrictions look set to be in place until 2 December 2020. The government will pay up to 80% of an employee's normal pay, capped at £2,500 and employers will be responsible for national insurance contributions (NICs) and pension contributions.
The existing furlough scheme was in the final stages of being wound down. For the past three months, the government contribution has been reducing, while the employer contribution has been increasing. For October 2020, the current maximum government contribution under the furlough scheme was 60% of normal pay (up to a cap of £1,875) and the employer contribution was 20% (up to £625). However, the extended furlough scheme will put the clock back to how things were in August 2020, when the government contribution was 80% of wages up to a cap of £2,500 and employers just paid employer NICs and pension contributions.
Flexible furlough will continue to be an option, so employees can work part-time and receive a furlough grant for unworked hours.
The JSS was divided into two parts – the JSS Open (for businesses operating where employees are working at least 20% of their usual hours) and the JSS Closed (where businesses are legally required to close their premises and employees have no work). Under the JSS Closed, the government would have paid 67% of employee wages, up to a maximum of £2,083.33 a month. Under the JSS Open, the position was more complicated, but the government contribution was capped at a maximum of £1,541.75 per month and the employer contribution was capped at £125 per month. This means that the extended furlough scheme is more generous than both the JSS Open and the JSS Closed.
The government has widened the furlough scheme so that, to be eligible under this extension, employees must simply have been on an employer's pay-as-you-earn payroll before midnight on 30 October 2020. This means that a real-time information (RTI) submission notifying payment for such employees to Her Majesty's Revenue and Customs (HMRC) must have been made on or before that date. This will come as particularly welcome news for employees who have never qualified for furlough but who would have been eligible for the JSS, including recent starters and employees who worked throughout the pandemic and never stopped working for three consecutive weeks before 1 July 2020 (a pre-condition of eligibility for the furlough scheme after July 2020).
HMRC has subsequently confirmed (although it is not included in the published announcement) that, if employees were on their employer's payroll on 23 September 2020 (ie, notified to HMRC on an RTI submission on or before that date) and were made redundant or stopped working for their employer afterwards, they can also qualify for the extended furlough scheme if they are re-employed. However, even though rehiring is allowed, employers will not be under any obligation to rehire and should take legal advice before doing so.
It is also unclear how the furlough extension will interact with the Job Retention Bonus, which provides that employers which bring workers back from furlough and retain them in employment until the end of January 2021 will qualify for a £1,000 bonus. Under the current rules of the bonus scheme, the employee must be kept in employment and paid a minimum amount for November 2020, December 2020 and January 2021. It remains to be seen whether furlough pay will count towards the minimum – the government had confirmed that JSS pay would count so, in principle, it seems likely that furlough pay should too – or if the government will now amend the bonus scheme.
Many businesses had already put in place JSS Open agreements in anticipation of the scheme's launch on 1 November 2020. Those businesses should contact affected employees as soon as possible to explain that the government has made a late decision to extend the furlough scheme and ask them to agree to continue being furloughed instead. Some possible wording that such employers might wish to use is provided below.
You may have seen that the government has made a last-minute decision to extend the furlough scheme. The government has said that the extended furlough scheme will remain open until December 2020. As a result of this extension, the start of the Job Support Scheme (JSS) will be delayed so that it starts after the end of the extended furlough scheme.
For employers that already have a JSS agreement in place
Although we are grateful to you for agreeing to enter into the JSS scheme, we now need to ask that you agree to be furloughed until December 2020 instead. This has the advantage of ensuring that you receive a higher percentage of capped pay than was available under the JSS scheme. I should be grateful if you could reply to this email confirming your agreement to remain on furlough until December on the existing furlough pay [and hours].
For employers that have no JSS agreement in place and the employee is already furloughed
As you are already on furlough/flexi-furlough, we propose to continue the existing furlough arrangements until December 2020. I should be grateful if you could reply to this email confirming your agreement to remain on furlough until December on the existing furlough pay [and hours].
For employers that have no JSS agreement in place and the employee is not furloughed
Given the impact that the lockdown is likely to have on our business, we would like to ask that you to agree to be furloughed/flexi-furloughed until December 2020. I have attached a letter setting out the arrangements we would ask you to agree. This reflects the arrangements we have in place with other furloughed employees.
For further information on this topic please contact Lucy Lewis, Carolyn Soakell or Colin Leckey at Lewis Silkin by telephone (+44 20 7074 8000) or email (firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Lewis Silkin website can be accessed at www.lewissilkin.com.
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