Coronavirus Job Retention Scheme: Furlough leave

This article summarises the current (as of 3 March 2021) guidance on furlough and the extension to the end of September 2021.

Further reference should also be made to the government guidance for employers and guidance for employees updated in March 2021. HM Treasury published its fifth Treasury Direction on 23 December 2020, which forms the legal framework for the Coronavirus Job Retention Scheme.

Extension of the furlough leave scheme

As before, furloughed workers are those individuals where it has been agreed they will go onto furlough leave. The furlough scheme was initially put in place for a four-month period from 1 March 2020, but this has since been extended, and will now apply until 30 September 2021.

Between August and October 2020, the CJRS was tapered and employers were asked to share the costs of the scheme with the government. Under the new scheme arrangements until 30 June 2021, we revert back to the arrangements that were in place in August, with employees receiving 80% of their current salary for hours not worked up to a maximum of £2,500.

From 1 July 2021, employers will be asked to share the costs of the scheme with the government, similar to last year. Government contributions will be up to 70% in July 2021, with a cap of £2,187.50. This will be reduced to a 60% Government contribution from August to the end of September when furlough is scheduled to end, up to a maximum of £1,875.

Employers will be responsible for paying National Insurance and employer pension contributions (estimated to be around 5% of total employment costs for an average claim).

The Government did confirm a review of the policy in January 2021 and depending on the current economic climate, employers might have been required to contribute a percentage towards their employees’ salary from January to March 2021 or some suggested it could have been limited to some particularly hard hit sectors, for example, hospitality.

However, in light of the third national lockdown, the Government continued to pay employees 80% of their salary for hours not worked up to the maximum of £2,500 until the end of April 2021, which has now been extended until the end of June 2021.

The Treasury Direction confirms that claims may only be submitted under the CJRS in respect of an employee “whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measure taken to prevent or limit its further transmission”.

Key information for employers

Under the new arrangements:

• Employers do not need to have used the CJRS previously.
• Employees must be on an employer’s PAYE payroll by 23:59 on 30 October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 30 October 2020. From 1 November 2020 onwards those employed from 30 October 2020 can receive payment provided an RTI was submitted to HRMC between 20 March 2020 and 30 October 2020. This still applies to those employees for periods ending on or before 30 April 2021. However, employers can no longer submit claims for periods on or before 31 October 2020.
• Employers can claim for employees for periods on or after 1 May 2021, provided they were employed on 2 March 2021 and have made a RTI submission notifying payment for that employee to HMRC between 20 March 2020 and 2 March 2021.
• Employees can be on any type of contract. Employers will be able to agree any working arrangements with employees.
• It is a condition of the scheme that employers accept that HMRC will publish information about claims made under the extended CJRS in respect of December 2020 and January 2021. The information published will include the employer’s name and a “reasonable indication” of the amount claimed. The information will be published on the Gov.uk website and by such other means as HMRC consider appropriate. There is an exception in cases where HMRC is satisfied that publishing the information will expose any person employed or engaged by the employer or anyone living with them to serious risk of violence or intimidation.
• A claim cannot be made in respect of any day in December 2020 and January 2021 where an employee is on notice of termination of their employment. The Treasury Direction does not limit this to being under notice for redundancy.
• When claiming for furloughed hours, employers will need to report and claim for a minimum period of seven consecutive calendar days.
• Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
• For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
• Employers with a UK bank account and UK PAYE schemes can claim the grant. Neither the employer nor the employee needs to have previously used the CJRS.
• The government expects that publicly-funded organisations will not use the scheme, as has already been the case, but partially-publicly-funded organisations may be eligible where their private revenues have been disrupted. All other eligibility requirements apply to these employers.
• The government has confirmed employers were able to claim from 8am on 11 November 2020 and claim in arrears for the period from 1 to 11 November 2020.
• Employers must have made their claims for the December period by 14 January 2021. Subsequently claims for each month must be submitted by the fourteenth day of the following month. However, the deadline for claims up to and including 31 October remains as 30 November 2020. This means claims can no longer be submitted for periods on or before 31 October 2020. HMRC does have discretion to amend the deadlines where the employer has a “reasonable excuse” for failing to meet the deadline.
• Employers must make claims for furlough days in February 2021 by 15 March 2021.
• Holidays can still be taken whilst an employee is on furlough leave. Employers paying individuals at the furlough rate are therefore likely to need to top up so employees receive the correct amount of holiday pay.  The guidance includes the following:  “Employees should not be placed on furlough for a period simply because they are on holiday for that period.” We suggest this may well be intended to cover pre-planned shutdown periods where a workforce has not otherwise been impacted by the COVID situation.
• The Job Retention Bonus Scheme was formally withdrawn by the latest Treasury Direction.

Under the terms of the current scheme structure, employers can continue to use the HMRC portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, extended to June 2021. Tax and employees’ NI are payable on furlough payments.

Flexible furlough

Before 30 June 2020 individuals on furlough leave could not undertake work for their organisation, or a related organisation during furlough. From 1 July 2020 it was possible for furloughed employees to return to work on a part-time basis and for their employer to claim under the furlough scheme in respect of the normal hours that they are not working.

The minimum three-week furlough period that applied until 30 June 2020 ceased to apply on 1 July 2020 and individuals can continue to be flexibly furloughed more than once. This allows employers to continuously rotate furloughed staff. Whilst employees can be on flexible furlough, the minimum claim period of seven consecutive calendar days still applies.

Additional record-keeping requirements mean that employers must retain records of the usual hours worked by individual employees (including the calculation used to establish usual hours) and the actual hours worked for six years.

Putting individuals on furlough leave

The position remains that employment law requirements will still apply.

Implementation for most employers who want to pay less than 100% pay is therefore:

• By agreement.
• Utilising existing contractual lay off clauses – although some commentators (including the CIPD) have suggested agreement should still be obtained and confirmed in writing.
• By imposition – most employers will need to follow a formal contract change process and collective consultation rules apply where 20 or more individuals are involved.

Placing an employee on furlough leave has to be confirmed in writing (although it has now been clarified that it is not necessary to have a written response from employees, confirming agreement). Documentation has to be kept for a minimum of five years.

The new Treasury Direction specifies that the agreement must be made before the beginning of the claim to which it relates, although it can be subsequently varied during the period to which the claim relates.

Due to the late notice of the extension to the furlough scheme, employers were able to rely on retrospective flexible furlough or furlough agreements up to and including 13 November 2020.

Further support

Please be aware that this is the top line information relating to furlough leave. For more in-depth guidance or support around this and other employment law issues, please get in touch.

This content is correct at time of publication