An end date of 31st October, employers being expected to contribute from August and a new “flexible furlough” option - the Coronavirus Job Retention Scheme is changing.
On 12th June 2020, HMRC released further guidance that explains in detail how the Coronavirus Job Retention Scheme (CJRS) will alter from 1st July 2020. In this article, we summarise the key changes that employers need to be aware of.
Which employees can employers claim for from 1st July?
From 1st July, only employees that you have successfully claimed a previous grant for will be eligible for further grants under the scheme (i.e. they have been furloughed for at least three consecutive weeks at any time between 1st March and 30th June 2020).
It is now too late to place employees on furlough for the first time. The 10th June 2020 was the last date on which an employee could be newly placed on furlough and qualify for the CJRS (unless they are returning from forms of family leave, for which special rules apply).
How many employees can an employer claim for under the Coronavirus Job Retention Scheme?
From 1st July 2020, you cannot claim for a greater number of employees than the maximum number you claimed under any single prior claim.
For example, if an employer has submitted three claims before 30th June, in which it furloughed 5, 15 and 25 employees respectively, the most it can furlough in a single claim from 1st July will be 25. Alternatively, where an employer has been rotating 10 employees, with five employees on furlough and five employees in work at one time, from 1st July, that employer can only claim for a maximum of five employees at one time.
There are exceptions to this rule for employees returning from forms of family leave.
What costs will the Coronavirus Job Retention Scheme cover from 1st July onwards?
In June and July, the government will continue to pay 80% of wages up to a cap of £2,500, plus employers’ National Insurance Contributions (ER NICs) and pension contributions.
However, the staffing costs that the government will cover are being gradually tapered through to the closure of the CJRS on 31st October 2020, with employers being required to contribute as follows:
- From 1 August: employer national insurance and pension contributions
- From 1 September: 10% of employee wages (up to £312.50) plus employer national insurance and pension contributions
- From 1 October: 20% of employee wages (up to £625) plus employer national insurance and pension contributions
See our previous update for a more in-depth look at how employers’ costs under the scheme will be changing.
What is flexible furlough?
From 1st July 2020 employees can be placed on a part-work, part-furlough working arrangement called “flexible furlough”. Any working hours will be paid in full (along with the usual deductions for tax and NICs) at an employee’s normal rate by the employer. Any time spent on furlough will be reimbursable under the scheme (subject to the relevant caps and employer contributions).
The government grant and wage cap will be decreased in line with the hours an employee does not work. For example, an employer can claim 50% of the £2,500 cap if their employee is only furloughed for 50% of their typical hours in July.
Employers are required to agree flexible furlough plans with employees (or reach collective agreement with a trade union) and ensure this agreement is confirmed in writing.
What are the claim periods for furlough?
The new HMRC guide “Steps to take before calculating your claim using the Coronavirus Job Retention Scheme” examines a series of considerations, investigations and calculations that are needed before submitting a claim under the revised CJRS. The key points include:
- Claim periods starting before 1st July must end on or before 30th June, even if an employee is continuously furloughed throughout June and into July. Separate claims will need to be submitted to cover the period in June and period in July.
- 31st July is the last day that employers can submit claims for periods ending on or before 30th
- The first time employers will be able to make claims for days in July will be 1st
- Claim periods starting on or after 1st July must start and end within the same calendar month and must last at least 7 days unless the claim is for the first few days or the last few days in a month.
- When claiming for employees who are flexibly furloughed employers should not claim until sure of the exact number of hours employees will have worked during the claim period. If the employee works for more hours than reported to HMRC, employers will have to repay some of the grant.
- Employers need to include all of the employees they want to furlough for each claim period because they will not be able to make another claim for the same period or one that overlaps with it.
What costs will be covered for flexible furlough?
If an employee is flexibly furloughed, the employer will be responsible for paying them at their normal rate for any hours worked, with reimbursement under the CJRS limited to those hours spent on furlough. Employers need to know their employee’s usual hours (see below) and must record the actual hours that employees work, as well as their furloughed hours, in each claim period. Any claim under CJRS is limited to a claim for unworked hours (and is subject to the applicable cap and employer contribution).HMRC has given a working example of how an employer should calculate a claim for someone on flexible furlough. HMRC has also issued a detailed guide, “Calculate how much you can claim using the Coronavirus Job Retention Scheme”, which examines the mechanics of claim calculation under the revised CJRS. An on-line calculator is also available.
How do we work out an employee’s usual hours?
The HMRC guidance provides calculation methods for a range of different types of employees, such as fixed hours, variable hours and piece work. The approach is potentially complicated and so the government’s guidance “Steps to take before calculating your claim using the Coronavirus Job Retention Scheme” should be carefully followed.
The new document HMRC guidance “Changes to the Coronavirus Job Retention Scheme” summarises the revisions taking effect from 1st July 2020 under the CJRS. To implement the revised CJRS, a further Treasury Direction will be required. To date, this has not been released. We will report when this direction is available.
The Coronavirus pandemic is an ongoing issue that continues to unfold and the government’s guidance is often subject to regular amendments. We strongly advise that employers remain alert and keep checking to make sure that you have the most current and up to date position.
We're here to help.
In addition to public guidance, there are always specific circumstances that individual employers must consider, such as a particular employee or employer arrangements or issues (contractual or otherwise). If in doubt, please take advice. You can reach us on 0161 941 4000 or email the Employment Team