How will the Furlough Scheme extension work?

When the country first went into national lockdown in March 2020, Chancellor Rishi Sunak launched the Coronavirus Job Retention Scheme – better known as the ‘Furlough Scheme’.

The scheme allowed employers to furlough their workers. This meant they were still employed, but they had to stay at home and not work. Between March and the end of July, Government would pay 80% of these employees’ wages (up to a cap), plus employer’s NICs and pension contributions. During August, employers had to pay the NICs and pension costs as well. In September, the Government contribution dropped to 70% and in October it fell to 60%.

Another significant change was introduced from 1st July. From this date, ‘flexible furlough’ became possible. In essence, employers could bring workers back part time. They would pay normal wages for the time employees worked, while the Government subsidised the remaining hours spent on furlough.

Why the Furlough Scheme has been extended?

The Furlough Scheme was due to expire on 31st October and be replaced by a less generous Job Support Scheme. However, due to an exponential rise in infections in recent weeks, the Government announced a new national lockdown in England, due to last from 5^th November to 2^nd December. Many businesses, particularly in the hospitality and entertainment sectors, will have to remain closed.

In order to help struggling businesses like these, the Chancellor first stated that the Coronavirus Job Retention Scheme would be extended until 2^nd December. Shortly afterwards, he announced that it would continue until 31^st March 2021. In addition, the Job Support Scheme has been shelved indefinitely, although Rishi Sunak has not ruled out introducing it at a later date.

Unsurprisingly, many of our clients have questions about how the Furlough Scheme extension will work – and who is eligible. This post is here to help you find the answers you need.

What will the Government contribute?

From 1^st November to 31^st January, Government will contribute 80% of a furloughed employee’s normal wages, up to a monthly cap of £2,500. Employers will need to cover employer’s National Insurance contributions and minimum pension contributions. They may also top up an employee’s salary above 80% if they so wish.  Government will review its policy in January to determine whether it should ask employers to contribute more to the scheme.  This will be dependent on whether economic conditions are improving.

Which employers are eligible?

Employers in England are eligible if they have a UK bank account and PAYE scheme. They do not have to have claimed under the Furlough Scheme before. Publicly funded organisations cannot use the scheme, but partially public funded organisation may do so if its private revenues have been disrupted.

Which employees are eligible?

Employees qualify for the scheme as long as they have been on their employer’s PAYE scheme since 30^th October. An RTI submission that notified payment for an employee must have been made to HMRC between 20^th March and 30^th October 2020, notifying a payment of earnings. Employees can be on any kind of contract.

Is ‘flexible furlough’ still allowed?

Yes. There is no minimum furlough period.  However, employers will need to report and claim furlough payments for a minimum claim period of seven consecutive days. For the hours that employees do work, they must be paid in accordance with their employment contract and the relevant employer’s NICs and pension contributions must be covered.

Can redundant workers be brought into the furlough scheme?

Yes, some of them can. Any worker who was on a payroll on 23^rd September 2020, but was subsequently made redundant or stopped working, can be re-employed and claimed for. Again, their employer must have made a PAYE RTI submission for them from 20^th March to 23^rd September 2020.

When can new claims be made?

Employers can claim under the extended scheme from Wednesday 11^th November at 8am. Claims relating to November 2020 must be made by 14^th December. Grant payments are expected to be made 6 working days after a claim. Fuller guidance on how to claim is expected to be published by Government at some point today.

Where can I get further advice?

If you are an employer, you will need to agree new working arrangements with staff members and notify them in writing. This agreement must be made available to HMRC if it is requested. If you need advice on drafting an agreement for a change in working pattern, or on any other aspect of the Furlough Scheme extension, please get in touch with a member of our Employment Team.

This article is accurate as at 10 November 2020, but is not a substitute for legal advice. Please check our website at Ellisons Covid-19 Business Support  for up to date developments.