Furlough to continue through second lockdown

November 2, 2020, By

Employers who had put plans in place for the Job Support Scheme must contact affected employees to explain the effect of the Government’s last-minute decision to extend the furlough scheme and seek their agreement to continue.

On Saturday, 31 October 2020 the Government announced a nationwide lockdown in England, beginning Thursday 5th November 2020.

As part of the announcement, Boris Johnson revealed that the Coronavirus Job Retention Scheme (the “Furlough Scheme”), which was due to end on 31 October 2020, will be extended until December to provide further protection to employees and businesses while the new lockdown is in force.

On 5th November, the Chancellor confirmed that the furlough scheme will be extended to March 2021.

Main points and key issues for employers below:

  • All employers with a UK Bank Account and PAYE, whether charitable or non-profit are eligible for the grant.
  • Neither the employer nor the employee needs to have previously used the Furlough Scheme in order to benefit. This should be welcome news for both employers and employees as it opens up the scheme and allows employees who were ineligible under the existing scheme to qualify including new starters as well as those who continued to work throughout the pandemic and did not cease working for three consecutive weeks before 1 July (employers may recall that this was a requirement for the post-July furlough scheme).
  • Employees on any type of contract can be put on the scheme. There are no limitations on the working arrangements that can be agreed with employees during the claim period. However, employees must have been on an employer’s PAYE payroll by 23:59 on 30th October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 30th October 2020.
  • Full-time furlough and flexible furlough will co-exist under the extended scheme. Employees can therefore either work part-time and receive the grant for the hours not worked or be placed on furlough full-time.
  • The existing scheme was gradually winding down with a corresponding decrease in Government contributions over the last three months. In October, Government contributions reduced to a maximum of 60% of an employee’s normal wages (capped at £1875) with employers’ contributions increasing to 20% (capped at £625). The extended scheme will however adopt the rules of the existing scheme as at August 2020, when Government contribution was 80%(capped at £2,500). Employers will only be required to pay national insurance and pensions contributions in relation to unworked hours. Employers should note that where they are using the flexible furlough option, they are required to pay the employee’s full contractual wages for the hours worked as well as tax and national insurance contributions due on those amounts.
  • As with the current scheme, employers are still able to choose to top up employee wages above the scheme grant at their own expense if they so wish.
  • Government guidance indicates that the extended scheme will largely operate as the previous scheme did and further guidance is expected shortly on how claims are to be made. However, during a short ‘change-over’ period where HMRC will be updating its systems to accommodate the extended scheme, businesses will be paid in arrears. After that, payments will be made upfront as it is with the current scheme.
  • Many employers may have already put arrangements in place in anticipation of the opening of the Jobs Support Scheme which was due to launch on 01 November 2020 (This has now been postponed until after the extended scheme). It will be prudent for those employers to contact any affected employees to explain the effect of the Government’s last-minute U-turn decision to extend the furlough scheme and seek their agreement to continue or be put on the furlough scheme instead and seek employees’ consent to any pay reduction if employers are not topping up unworked hours to full pay.

It is important for employers to ensure that they have written agreements from all affected employees before placing them on the extended scheme (including their agreement to any reduction in pay).

Contact us with any questions

If you require any further information in relation to the extended scheme, including how to implement it in your business and the related agreements, please contact [email protected].

You can also call us on 0161 969 3131 or fill in our contact form.