On 12 June 2020 the government published more detailed guidance on the changes to the Coronavirus Job Retention Scheme (CJRS) which will take effect in ‘Phase Two’ of the scheme, from 1 July 2020. These changes were outlined in our previous briefing on 1 June 2020.
The additional detail has largely been added to the existing guidance on the CJRS, although there have been a number of new documents published. All of the guidance is available here.
The overall position as outlined in our previous briefing on 1 June 2020 remains largely unchanged. The main additional points for employers to be aware of are set out below.
- Furlough agreements: In order to implement flexible furlough arrangements, employers will need to enter into a new written agreement with the employee (or a collective agreement with a trade union). This is in contrast to the position for ‘full’ furlough, where the guidance still states that the agreement must simply be recorded in writing, and that employees do not need to provide a written response.
- Who can be furloughed? From 1 July, employers will only be able to furlough employees who have previously been furloughed for a period of at least three consecutive weeks in the period between 1 March and 30 June. They will also not be able to furlough a greater number of employees than were furloughed in any single claim ending on or before 30 June. These principles are subject to two exceptions:
- Employees returning from family-related leave. These employees can be furloughed for the first time after 10 June 2020, provided the employer has previously made a claim under the CJRS in respect of other employees, and the returning employee was on the employer’s payroll (with an RTI submission made to HMRC) on or before 19 March 2020.
- TUPE transfers. For TUPE transfers after 10 June, the transferee can furlough transferred employees provided that the TUPE or PAYE business succession rules apply to the change in ownership, and the employees being claimed for have previously had a claim submitted for them by their previous employer in relation to a furlough period of at least three consecutive weeks taking in the period between 1 March and 30 June. In these circumstances, the maximum number of employees that the new employer can claim for will be the total of both:
- the maximum number of employees the new employer claimed for in any single claim ending on or before 30 June, and
- the number of transferred employees which have had a claim submitted for them in relation to a furlough period of at least three consecutive weeks in the period between 1 March and 30 June. This is subject to the maximum cap the previous employer was subject to (it seems therefore that the transferee cannot count more employees under this head than the maximum number of employees that the transferor furloughed pre-1 July).
Transferees must ensure that they obtain all the relevant information from transferors about their previous furlough arrangements as part of due diligence.
- No minimum furlough: From 1 July, flexible furlough agreements can last any amount of time. The three week minimum furlough period will no longer apply (although it will still apply to any furlough period which starts in June but extends into July).
- Claim periods: Although there is no minimum period of furlough, any single CJRS claim must be for a minimum of seven calendar days. There are exceptions for claims which cover either the first few days or the last few days in a month, to accommodate the restriction on claims spanning different months.
- Usual hours of work: In order to claim under the CJRS for a flexibly furloughed employee, the employer must calculate the employee’s usual hours of work. The calculation will vary depending on whether the employee has fixed hours, or whether the employee has variable hours (or their pay depends on the number of hours they work). The guidance includes worked examples for each type of calculation.
- Hours which can be claimed under the CJRS: The actual hours worked in a particular claim period are then deducted from usual hours that would have been worked during that period, and the balance is the number of hours in respect of which wages can be claimed under the CJRS. For example, if an employee usually works 40 hours in a claim period, but only actually works 20 hours, the employer would be able to claim for the remaining 20 hours under the CJRS. Hours worked must be paid wholly by the employer in the normal way.
- What are the new wage caps? The existing requirement that furloughed employees must receive at least the lower of 80% of their regular wages and £2,500 per month continues to apply. However, from 1 July this will not necessarily be the same as the amount employers can claim from the CJRS, for two reasons:
- From 1 July, the amount which can be claimed under the CJRS is reduced in proportion to the hours worked by a flexibly furloughed employee. For example, an employee is entitled to 60% of their regular wages (or, if less, 60% of the £2,500 cap) if they are placed on furlough for 60% of their usual hours. The employer will be required to pay the employee in full for the hours spent at work.
- From 1 August, the CJRS grant will be tapered down, and employer contributions to furloughed wage costs will be required, as follows:
- From 1 August: employer NICs and pension contributions
- From 1 September: employer NICs and pension contributions plus 10% of wages up to a cap of £312.50
- From 1 October: employer NICs and pension contributions plus 20% of wages up to a cap of £625
- The guidance provides worked examples of how to perform the various wage calculations.
- When to claim: When claiming for employees who are flexibly furloughed, employers should not claim until they are sure of the exact number of hours the employee will have worked during the claim period. This may make it logistically more difficult to submit claims and receive funds in advance of payroll dates. If the employer claims in advance and the employee works for more hours than have been notified to HMRC, the employer will have to pay some of the grant back to HMRC.
- Correcting errors: If employers make an error in their claim, there is new guidance on how to correct it.
- Record keeping: There is now an additional record keeping requirement: employers must keep records of how many hours their employees work and the number of hours they are furloughed (i.e. not working). These records must be kept for at least six years (the requirement to keep the furlough agreement (or written confirmation of it) remains at five years).
Employers who are currently utilising the CJRS will need to start considering now whether they will continue to use the scheme in Phase Two, and what changes they may need to make to furlough agreements with employees. Employers can choose to continue fully furloughing employees, or rotate employees on and off furlough, rather than utilising flexible furlough. This may be the most straightforward approach for some employers, given the additional complexity involved with calculations for flexible furlough. Employers will also need to start thinking about what they will do when the CJRS closes at the end of October, and possibly from August when employer contributions are introduced. Employers may need to begin looking at other options, including redundancies.
Employers should also be aware of the likelihood of further changes to the CJRS. The current Treasury Direction which provides the legislative basis for the CJRS only covers the period until 30 June, so a further Direction will be needed to cover Phase Two (but has not yet been published). There are also discussions ongoing about what other support may be available to employers as the CJRS winds down, including the possibility of grants for employers who cannot yet resume business, and/or a possible amendment to the Apprenticeship Levy to help subsidise wages.
