Extended furlough scheme- your questions answered
The furlough scheme was due to end on 31st October 2020 and with effect from 1st November 2020 the Job Support Scheme (JSS) was due to take its place.
On Saturday 31st October 2020, the Prime Minister announced that the Coronavirus Job Retention Scheme (CJRS or Furlough Scheme) was going to be extended throughout November 2020. However, a further announcement on 5th November 2020 confirmed that the furlough scheme will now be in place until the end of March 2021.
These last minute announcements, though offer some welcome support for a lot of businesses, have also thrown up a lot of questions and caused increased uncertainty during a time which already has plenty of both. In this article we look at the extension of the scheme in more detail, as well as addressing some key questions.
What are the rules and eligibility requirements for the extended period of furlough?
- A business can use furlough even if they have not used it before. It applies to business who are forced to close and those who are able to remain operational.
- An employee can be furloughed even if they have not been furloughed previously but they must have been on their employers PAYE payroll on 30 October 2020 and the employer must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This is great news for employees who didn’t qualify previously due to the employment commencement dates and for those who were not furloughed by the previous cut-off date of 10th June 2020.
- Employees will receive 80% of their current salary for hours not worked, up to a maximum of £2,500.
- Employers will pay for any hours the employee works, plus employer National Insurance Contributions and pension contributions but only for the hours the employee does not work.
Has the Job Support Scheme (JSS) been scrapped?
The current government guidance states that the scheme has been ‘postponed’. We don’t know whether there are plans to reintroduce the scheme at a later date but from a legal standpoint, businesses should consider the JSS to be ‘off the table’ for now when looking at the current financial support options available.
Do I need to write to staff who I have written to regarding the Job Support scheme?
If you intend to use furlough but have written to staff to place them on the JSS then contact our experts as we have a letter for you to use to confirm the extension of furlough and notifying them of the postponement of the JSS.
What do I need to do if I want to extend my employees furlough leave?
If your employees are already on furlough or on flexi-furlough, then you don’t need to seek their consent to keep them on furlough. However, our experts can provide you with a letter to notify them that their furlough is being extended, as is good practice.
What about staff who have returned to work but now need to be placed back on furlough. Can I rely on their previous agreement or do I need to write to them again?
That’s a good question and one we are have received from several clients over the past week.
On the one hand there is the argument to say that they have agreed to be furloughed once so that should be good enough. On the other hand and from a legal standpoint, by bringing an employee back from furlough they may successfully argue that this saw the end of their agreed period of furlough and also the end of their consent to be placed on furlough.
Remember, the reason we are seeking consent to be place someone on furlough, is not only to satisfy the HMRC but it is also because in most cases an employee’s wages are being reduced by 20%, so if we just put them on furlough without agreement this gives rise to risk of a breach of contract claim and is also an illegal deduction in wages.
Therefore, if we simply place staff back on furlough without seeking further consent, there is a risk of a breach of contract and illegal wage deduction claim.
Our experts have the relevant letter for you to use for precisely this purpose.
Do I have to continue to use furlough or can I still proceed with making the redundancies I had already begun consulting on?
Now this presents a real dilemma for employers.
Technically an employee cannot insist on being furloughed, so you can continue with redundancy dismissals and as far as we know, there doesn’t appear to be any rules preventing employers from claiming under the furlough scheme and still making redundancies.
Weigh up the cost of continuing to furlough someone versus the cost of redundancy. Redundancies may appear more cost effective in the longer term but furlough may be more cost effective in the shorter term when you need to make the saving quickly.
Consider that even if you are making someone redundant who is not entitled to redundancy pay, they are still entitled to paid notice and any annual leave they have accrued. You may well be able to claim through the furlough scheme for some of their notice but notice pay and annual leave should be paid at full salary. Also the furlough scheme will not cover redundancy payments, nor will it cover accrued annual leave payments payable on the termination of employment.
Weigh up your options carefully and chat them through with our experts.
Can I re-hire an employee who has recently left or been made redundant and put them back on furlough?
1,700 employers were contemplating redundancies in September and many employees were made redundant. It is also very likely that the original plans to withdraw the furlough scheme on 31st October 2020 was a factor in many business decisions to carry out those redundancies.
The government has announced that employers are able to rescind notice and re-hire employees with a view to putting them back on furlough, although this is not something employers are legally obligated to do so.
What are my options if employees refuse to go back on furlough or refuse to consent to furlough if being furloughed for the first time?
If they refuse and you have no work for them, or not enough work to employ them for their full contractual hours, you will need to consider redundancy or lay off/short time working.
- Lay off is where you have the option to keep your employees away from work without their contractual pay/salary whilst maintaining their employment.
Lay off can be for their full contractual hours or 1 day a week.
Contractual pay is not payable during lay off but statutory guarantee pay (SGP) is payable where at least 1 day of work is lost. The current rate is £30 per day for a maximum of 5 days in a 3-month period.
Depending on the individual circumstances, an employee may be entitled to employment benefits during a period of lay off.
- Short time working involves an employee’s contractual hours being temporarily reduced.
It is still used for the same reasons as lay off but, in this instance, no full days are lost and therefore SGP is not payable. Instead employees are paid only for the hours that they work.
As you can see the above options are much less financially beneficial to employees than receiving up to 80% of their ages whilst on furlough.
IMPORTANT! You are only able to use lay off or short time working where your contracts of employment or employment handbooks allow. It is also vital that you seek advice from our experts before doing so.
Does the furlough extension apply across the UK or just in England?
It is applicable across the UK.
Can I still use flexi-furlough or are employees prevented from doing any work whilst on furlough?
It is whatever suits the needs of your business.
Employers have the flexibility to ask employees to work on a part-time basis and furlough them for the rest of their usual working hours or furlough them full-time.
Can annual leave be taken during furlough?
Employees can request and take annual leave whilst on furlough.
Please be aware that if an employee is taking time off on annual leave during furlough you will be required to ‘top up’ the remaining 20% of their pay.
Can I insist employees take annual leave?
Employers can insist their employees take annual leave but you need to give them notice.
The rule is that you give them twice the amount of notice as the time you want them to take off. For example, if you want them to take a week off, they need to be given two weeks’ notice.
What about the Job Retention Bonus?
The Job Retention Bonus is a £1,000 one-off taxable payment to the employer, for each eligible employee who was furloughed and kept continuously employed until 31 January 2021.
The Chancellor has announced on 5th November 2020 that owing to the extension of the furlough scheme, the plans for the Job Retention Bonus is no longer required.
For further details on other forms of financial support along with how and when to claim for extended furlough payments, please see the following here.
And finally…. the above information is based on the current guidance and our interpretation of that guidance. We have all seen how quickly the situation changes and therefore it is vital that you seek advice from our experts throughout and before taking any action. We will endeavour to keep our clients updated in line with any further announcements.
Please quote your Client Account Number on all correspondence and telephone calls. 24-hour client advice line: 0800 151 2935.