On 10 November 2020, the updated HMRC Guidance for the extended Coronavirus Job Retention Scheme (CJRS)/ furlough scheme, was published.
We recommend that employers planning to use the scheme moving forward, review the guidance listed below, but we have produced a brief summary of the key points in this note to assist.
The main updated HMRC guidance notes are:
- check which employees you can put on furlough
- check if you can claim for your employees’ wages
- steps to take before calculating your claim
The headline points are as follows:
- The Coronavirus Job Retention Scheme is being extended until 31 March 2021.
- 30 November 2020 is the last day employers can submit or change claims for periods ending on or before 31 October 2020.
- The scheme is open to employers who “cannot maintain their workforce because their operations have been affected by coronavirus (COVID-19)”. The employer can furlough employees and apply for a grant to cover a portion of their usual monthly wage costs where they are recorded as being on furlough. There are no current financial assessments, and it is not known how an employer will have to evidence the affect COVID-19 has had on their business.
- From 1 November 2020, an employer can claim 80% of an employee’s usual salary for hours not worked, up to a maximum of £2,500 per month. The government will review the scheme in January 2021 and may then, as previously, increase the contribution required from the employer.
- An employer can claim for employees who were employed on 30 October 2020, as long as they have made a PAYE RTI submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This may differ where an employee has been re-employed after 23 September 2020.
- The employer need not have previously claimed for an employee before the 30 October 2020 to claim for periods from 1 November 2020.
- Employers can furlough employees for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked i.e. an employer can fully furlough employees, or flexibly furlough employees.
- For periods from 1 November 2020, employers will only need to pay for the cost of employer NICs and pension costs for unworked hours, but this may change on review in January 2021.
- There is no maximum number of employees you can claim for from 1 November 2020.
- If the employers staff costs are publicly funded, the employer should use that money to continue paying their staff, and not furlough their staff. However, organisations may be able to use the scheme if they are not fully funded by public grants and they should contact their sponsor department or respective administrator for further guidance.
- As before, employers need to agree furlough arrangements with employees and make any changes to the employment contract by agreement. Employers will need to check that existing furlough agreements remain fit for purpose for the extended scheme and have not expired. If in doubt, we’d recommend obtaining a new agreement from the employee. To be eligible for the grant, employers must have confirmed to their employee in writing that they have been furloughed. The employer must keep a written record of the agreement for five years, and keep records of how many hours the employees work and the number of hours they are furloughed (i.e. not working). The employee does not have to provide a written response although we would recommend obtaining their agreement in writing as proof of the agreement reached.
- Employers can:
- fully furlough employees - they cannot undertake any work for the employer while furloughed full time
- flexibly furlough employees - they can work for any amount of time, and any work pattern but they cannot do any work for the employer during hours that they are recorded as being on furlough
- Any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of a CJRS claim. Only retrospective agreements put in place up to and including the 13 November 2020 may be relied on for the purposes of a claim.
- There is no minimum furlough period, agreed flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once. Although flexible furlough agreements can last any amount of time, unless otherwise specified the period that a claim is made for must be for a minimum claim period of seven calendar days.
- During hours which an employer records an employee as being on furlough, they cannot be asked to do any work that:
- makes money for the employer or any organisation linked or associated with the employer
- provides services for the employer or any organisation linked or associated with the employer
- A furloughed employee can:
- take part in training
- volunteer for another employer or organisation
- work for another employer (if contractually allowed)
- The guidance states than an employer can continue to claim for a furloughed employee who is serving a statutory notice period, however grants cannot be used to substitute redundancy payments. The previous scheme allowed for claims for contractual and statutory notice periods, so it is unclear whether the reference to “statutory” notice is deliberate, but I think it is likely and that contractual notice may potentially be out of scope for coverage. Further clarification will be needed from the government on this point. In any event, the guidance also states: “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.” It is really not clear as to whether this will only affect notices issued after 1 December 2020 (which would seem to encourage employers to fast-track redundancy plans), or notice periods that span over pre- and post- 1 December 2020. Again, further clarity is needed from the government on this point.
- Furloughed employees will continue to accrue holiday entitlement as per their employment contract. The employer and employee can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below. Employees can take holiday whilst on furlough. If an employee is flexibly furloughed, the guidance states that any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours. It is not clear whether this means any hours, or just the normal unworked hours. Employers will be obliged to pay employees who are on holiday additional amounts over the grant to make pay up to normal pay as before.
- From December 2020, HMRC will publish employer names for companies and Limited Liability Partnerships (LLPs), the company registration number of those who have made claims under the scheme for the month of December onwards. It is unclear as to what the logic or reason for the publishing of the names of employers is.
As can be seen from the above, there unfortunately remain a number of areas of uncertainty arising from the guidance, and it is hoped that the government will provide further clarity on these points at a very early stage.
Please note, all advice and opinion offered in this article are subject to change in line with the latest government advice.