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06 November 2020

272: Extension of the Furlough Scheme: what to consider?

We understand that businesses are having to constantly keep up to date and adapt to the numerous changes made by the government in relation to the wage support schemes. For the last five months the government has been adamant that the Coronavirus Job Retention Scheme – also known as the Furlough Scheme – will not be extended beyond the 31 October 2020 and instead we would be introduced to the new Job Support Scheme (JSS) from the 1 November 2020. However, on 5 November 2020, the Chancellor, Rishi Sunak has announced that the Furlough Scheme will be extended and remain open until 31 March 2021 due to the recent national lockdown restrictions. Subsequently the JSS has been put on hold (for now) and we await guidance as to whether this will launch when the Furlough Scheme extension ends.

The government has made it clear that the extended Furlough Scheme will operate as the previous scheme did. This blog will not detail the ‘ins and outs’ of the scheme as we await further guidance which is promised to be published next week, however, we will set out the significant elements which employers should consider:

  • the government will pay 80% of normal wages, up to a cap of £2,500 per month. There will be NO employer contribution to wages for hours not worked;
  • unlike the earlier months of the Furlough Scheme, employers will be required to cover National Insurance and employer pension contributions for employees on the scheme;
  • neither the employer nor employee needs to have previously been on the Furlough Scheme;
  • to be eligible, employees must be on employer’s PAYE payroll by 30 October 2020;
  • HMRC has subsequently confirmed that, if employees were on the payroll on 23 September 2020 (ie notified to HMRC on an RTI submission on or before 23 September) and were made redundant or stopped working for the company afterwards, they can also qualify for the scheme if they are re-employed;
  • flexible and full time furloughing are available, which means employees can continue to do some work;
  • for employees that have previously been furloughed:
    • they will continue to have their reference pay and hours based on their existing furlough calculations. We await further guidance.
  • for employees who have not previously been furloughed will have different pay / hours reference period based on:
    • fixed wages: 80% of the wages payable in the last pay period ending on or before 30 October 2020; or
    • variable wages: 80% of the average payable between the start date of their employment or 6 April 2020 (which is later) and the day before their Furlough Scheme extension period begins. Again, we await further guidance.
  • under the Furlough Scheme, redundancy consultation can take place, notice of redundancy can be given, notice can be worked and employment can terminate by reason of redundancy. Notice pay must be topped up to normal pay and redundancy pay must also be based on normal pay. However, if JSS replaces furlough, consultation can still take place while employees are being paid under that scheme, but employers can no longer claim under the JSS once an employee is put on notice or made redundant;
  • the Job Retention Bonus will not be paid in February but instead the government say they will redeploy a retention incentive at the right time;
  • it should also be remembered that furloughing an employee requires their agreement; and
  • claims can be made from 8am Wednesday 11 November. Claims made for November should be submitted to HMRC no later than 14 December 2020 and claims for subsequent months should also be submitted by day 14 of the following month.

We understand that many businesses had already put in place JSS agreements in anticipation of the scheme’s launch on 1 November 2020. Those businesses should contact affected employees as soon as possible to explain that the government has made a late decision to extend the Furlough Scheme and therefore subsequent arrangements need to be made.

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