The government has outlined some further details on the changes to the Coronavirus Job Retention Scheme (CJRS), following its announcement to extend the scheme until the end of October 2020. It has also stated that the scheme will close to new entrants on 30 June 2020. In this article we consider the impact of the government’s proposals ahead of new guidance which is due to be issued on 12 June 2020.
The current scheme
The scheme, as set out in the amended Treasury Direction dated 20 May 2020, provides for employers to retain workers on their payroll and for the workers to be furloughed instead of providing them with work. An employer can claim a grant to reimburse up to 80 per cent of a furloughed employee’s wage costs up to a maximum of £2,500 gross per month (plus employers’ National Insurance contributions). In addition, the employer can also claim pension contributions (up to the level of the minimum automatic enrolment employer pension contribution) based on the subsidised furlough pay. In order to be able to claim the grant, the minimum period a worker can be furloughed is three weeks.
What is changing?
The key changes are:
- The CJRS will be closed to new entrants;
- The minimum three-week furlough period will no longer apply introducing ‘flexible furloughing’; and
- The government will start to wind down the level of grant employers can claim towards wage costs until the CJRS closes on 31 October 2020.
No changes have yet been made to the Treasury Direction and all we have so far is a Treasury factsheet published on the government website.
Cut-off date for new entrants
Even though the CJRS officially closes to new entrants on 30 June 2020, because of the current requirement that workers must be furloughed for a minimum of three weeks, the last date new entrants can actually be furloughed is three weeks earlier, 10 June 2020 (although see regarding pregnant workers and those on maternity or paternity leave below).
From 1 July 2020 employers will be able to bring workers who have already been furloughed before 30 June 2020 (the cut-off date for new entrants) back to work for any amount of time and on any shift pattern that is agreed with the worker. The worker will in turn be entitled to be paid their normal wages for the work undertaken and this must be paid by the employer. The employer will however still be able to claim the CJRS grant for the days that the worker is not working when they ordinarily would have done so.
Winding down of the CJRS grant
From 1 August 2020 the level of the grant will gradually be tapered on the assumption that more and more people will return to work. This will apply as follows:
August - employers will still be able to claim a grant of 80 per cent of wages up to a cap of £2,500 for the hours the worker does not work but the employer will be required to pay employer National Insurance contributions (NICs) and pension contributions for the hours the worker does not work.
September - employers will be able to claim a grant of 70 per cent of wages up to a cap of £2,187.50 for the hours the worker does not work plus employer NICs and pension contributions. Employers will be expected to pay at least the additional 10 per cent so that workers continue to receive the minimum 80 per cent.
October - employers will be able to claim a grant of 60 per cent of wages up to a cap of £1,875 for the hours the employee does not work plus employer NICs and pension contributions. Employers will be expected to pay at least the additional 20 per cent so that workers continue to receive the minimum 80 per cent.
The CJRS is due to close on 31 October 2020.
Impact of the changes
Following the decision to bring the scheme to a close in October, the Office for Budget Responsibility (OBR) reduced its estimate of the overall cost of the CJRS by 30 per cent. The OBR puts this down to the fact that the grants being claimed are for 8.7 million jobs largely concentrated on the wage costs of the lower paid.
There was no warning of the early cut-off date for new entrants when the Chancellor first announced that the CJRS was to be extended on 12 May 2020. The deadline for new entrants to be furloughed is likely to hit vulnerable workers hardest.
Those who are shielding
Those who are shielding have faced difficulties when employers have refused to furlough them and instead insisted they should be placed on statutory sick pay. The tight deadline means that any possibility of persuading employers to change that stance and to furlough them in the future will be removed. This will lead to those shielding facing the stark choice of returning to work and putting their health at risk or staying safe at home but remaining on a significantly reduced rate of pay. Those who have thus far being able to claim contractual sick pay under their contracts of employment may find this entitlement is exhausted and the option of being furloughed is also closed off to them.
The shadow chancellor has called upon the government to:
- exempt those shielding from the 10 June 2020 cut-off date;
- allow those shielding a right to be furloughed if they cannot work from home; and
- exempt employers from having to pay enhanced contributions towards the wages of those who are shielding and on furlough.
Maternity and Paternity Leave
The government announced on 9 June 2020 that parents on statutory maternity and paternity leave who return to work in the coming months will still be eligible for the furlough scheme even after 10 June cut-off date. This comes after a letter was sent by Maternity Action to the Chancellor requesting that government guidance makes clear that pregnant women can be furloughed.
Part-time furlough in practice
How part-time furlough will work in practice is unclear. The Chancellor had suggested at the conference announcing the changes that this would allow for a worker to work two days and be furloughed for three days. However, in a written statement to the House of Lords on 3 June 2020 the Chancellor stated that ‘any furlough arrangement agreed between the employer and employee reported in a claim to HMRC must still cover a period of at least one week.’ This has been interpreted by some as requiring a minimum furlough period of a week. We do not believe this is correct because the reference is to reporting requirements to HMRC.
Whether an employer could put all workers who are paid by PAYE on part-time furlough is also unclear. The government factsheet states that the number of employees that an employer will be able to claim for cannot exceed the maximum number the employer previously claimed for. On this basis any employer who has adopted a rotating furlough model may be unable to deploy all those who have previously been furloughed under a flexible working model as that would exceed the total number of workers that have previously been furloughed. We can only assume that these issues will be clarified when the further guidance is issued on 12 June 2020.
Until 12 June employers will need to agree with workers any new flexible furlough arrangements. They should therefore review their current furlough agreements in negotiation with the recognised trade unions.
You can read the factsheet in full here.
You can read the written statement in full here.
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