With employers now making provisions for more/extended furlough arrangements following the Prime Minister's surprise announcement on 31 October that the furlough scheme would be extended beyond its original end date of 31 October, further important details have now been clarified.
This article was first published on 5 November 2020 and updated on 11, 16 and 18 November 2020 to take account of recently published Government Guidance, amended legislation and a fifth Treasury Direction published on 13 November.
Furlough scheme extended
As we now know, the Chancellor announced on 5 November that the furlough scheme would be extended by a total of another five months until the end of March 2021. From a scheme that was only meant to be a temporary measure, lasting for three months, it will have been in place for 12 months.
This extension coincided with the national lockdown in England commencing on 5 November. The furlough extension meant a postponement of the Job Support Scheme, which was due to start on 1 November and for more details see our recent update.
Extensive Guidance about the furlough extension was published on 10 November, with significant amendments to the Guidance and a new Treasury Direction published on 13 November. Some of the links are at the end of this article. Whilst many provisions of the extended furlough scheme are unchanged, there is now a very significant change about claiming for notice pay during periods of furlough.
The key points to note about the extended furlough scheme are as follows:
- The furlough scheme is extended to 31 March 2021 and continues to apply across the UK. Flexible furlough is permitted and employers can furlough employees for any amount of time and any work pattern.
- For claim periods to the end of January 2021, the Government will pay employees 80% of their salary for hours not worked, up to a maximum of £2,500 a month. Note that the Government will review the policy in January to see if the economic climate has improved enough for employers to contribute more.
- The Guidance has been updated, and the Treasury Direction now specifically says, that a claim for furlough pay may not be made for employees serving notice periods between 1 December 2020 and 31 January 2021. The Guidance specifically refers to contractual and statutory notice periods and makes clear that this includes notice periods as a result of retirement or resignation, not just redundancies. The Guidance also states that statutory notice pay will have to be paid at full pay, not their reduced furlough pay of 80%. Commentators have previously considered what level of notice pay an employee is entitled to whilst on furlough where they have agreed to be paid 80% of their pay. This was rectified some time ago by specific legislation referring to the CJRS and providing that notice and other pay must be at 100% of pre-furlough pay. On 18 November, that legislation was extended to cover people who were on furlough until 31 March 2021. However, it is not entirely clear whether an employee under notice after 30 November will actually be on “furlough” if the employer cannot make a claim for them (due to the purpose of the CJRS as set out in the Treasury Direction). This raises a number of questions and possibilities under certain complex notice pay provisions of the Employment Rights Act 1996 if the employee is no longer considered to be on furlough, but the fact that this is specifically stated in the Guidance could be something Employment Tribunals rely on. On balance, it is likely that employers will have to bear the cost of the notice pay (and any other payments set out in the legislation, e.g. entitlement to redundancy pay etc) at the employee’s full rate after 30 November, although there are potential technical arguments against this. With such an extra cost burden it could speed up some redundancies in terminating employment by the end of this month. At this stage, however, cost savings are likely to be minimal and the risk of a hurried redundancy process could leave employers open to claims of unfair dismissal or potentially other claims such as discrimination.
- All employers with a UK bank account and UK PAYE schemes can claim the grant. Employers will need to fund NICs and pension contributions and for an average claim, this accounts for 5% of total employment costs or £70 per employee per month.
- Neither the employer nor the employee needs to have previously claimed or have been claimed for under the original furlough scheme to make a claim under the extended furlough scheme provided that other eligibility criteria are met.
- An employer can claim for employees who were employed and on their PAYE payroll on 30 October 2020 provided they have made a PAYE RTI submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This may differ where an employer has re-employed an employee after 23 September 2020.
- Employees that were employed, and on the payroll on 23 September 2020 who were made redundant or stopped working afterwards can be re-employed and claimed for.
This provision was included in the announcement of 31 October. However, it was difficult to envisage at that time why an employer would choose to exercise this option when the furlough extension was only for a month and would have been immediately followed by the Job Support Scheme under which employees had to work a minimum 20% of their usual hours. The further extension of the furlough scheme to the end of March, announced by the Chancellor on 5 November, may make re-hiring a more feasible option. However, there are significant legal and practical implications of re-hiring (as well as cost implications) and employers should obtain legal advice before making any decision to re-hire.
- Significantly, from December 2020, HMRC will publish the names of employers who make claims in December 2020 and January 2021 under the extended furlough scheme. The fifth Treasury Direction states that HMRC must publish not only the name of the employer, but the amount of the CJRS claim made by that employer (although HMRC may publish an amount that gives a reasonable indication of the claim, rather than the exact amount). The information must be published by a notice on Gov.uk or by such other means as HMRC consider appropriate. For companies and Limited Liability Partnerships (LLPs), HMRC will also publish the company registration number. This provision would have applied to the Job Support Scheme but did not apply to the original furlough scheme.
- Furlough agreements must be in place before the start of the furlough period in respect of which CJRS payment is claimed for (they can be an update on a previous furlough agreement). Where consistent with employment law, any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of making a claim. Only retrospective agreements put in place up to and including the 13 November 2020 may be relied on for the purposes of a claim. The new Guidance reiterates the Guidance given under the original furlough scheme that, the agreement must be consistent with employment, equality and discrimination laws and employers should keep a written record of the agreement for five years.
- Claims can be made from 8am Wednesday 11 November and claims made for November must be submitted to HMRC by no-later than 14 December 2020. There is no maximum number of employees that can be claimed for under the extended furlough scheme.
Note that employers can continue to claim for periods ending on or before 31 October, that is, under the original furlough scheme, until the deadline on 30 November.
What about the Job Support Scheme and the Job Retention Scheme Bonus?
The Job Support Scheme has been postponed because of the extension of the furlough scheme.
The Job Retention Scheme Bonus was based on employers keeping on staff continuously to the end of January 2021. As the extended furlough scheme will be in place at that time, the policy objective of staff retention falls away, and the fifth Treasury Direction deals with this. However, a new retention incentive will be deployed at another time.
Unsurprisingly, many of the provisions of the extended furlough scheme are unchanged. After all, this is an extension of the existing scheme rather than a new scheme. Consequently, while employees are furloughed, they cannot do any work for their employer that makes money or provides services for the organisation or associated organisation but they can take part in training or volunteering. Similarly, employees retain their employment rights such as the right to annual leave, family friendly rights, redundancy payments and the right not to be unfairly dismissed.
However, a big change for employers will be in relation to the inability to claim furlough payments during notice periods after 30 November, whether statutory or contractual notice.
There is even a question mark over notice until 30 November, with inconsistent references in the Guidance documents to statutory or statutory and contractual notice, although this is most likely due to drafting errors. The revised Guidance Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme states that where employers make redundancies, they should do so in accordance with the normal rules, which includes giving a notice period and consulting staff before a final decision is reached. The Guidance goes on to state that employers “can continue to claim for a furloughed employee who is serving a statutory period of notice however grants cannot be used to substitute redundancy payments.” The revised employee Guidance Check if your employer can use the Coronavirus Job Retention Scheme also refers to redundancy but states that “your employer can continue to claim for you while you are serving a statutory or contractual notice period, however grants cannot be used to substitute redundancy payments.”
Finally, in relation to TUPE, HMRC have just corrected an error in the Guidance. For claim periods after 1 November 2020, a new employer is eligible to claim in respect of the employees of a previous business transferred if the TUPE or PAYE business succession rules apply to the change in ownership. The employees being claimed for should have been employed by their prior employer on or before 30 October 2020 and transferred from them to their new employer on or after 1 September 2020. The previous version of the Guidance incorrectly referred to “on or before 1 September.”
Contact our employment team if you have need any legal advice about furlough.
This article was first published on 5 November 2020 and updated on 11, 16 and 18 November 2020 to take account of recently published Government Guidance and the Fifth Treasury Direction.
Furlough scheme useful links:
- Government Policy paper – Extension of the Coronavirus Job Retention Scheme
- Government Guidance – Check if you can claim for your employees’ wages through the Coronavirus Job Retention Scheme
- Government Guidance – Check which employees you can put on furlough to use the Coronavirus Job Retention Scheme
- Government Guidance – Steps to take before calculating your claim using the Coronavirus Job Retention Scheme
- Government Guidance – Check if your employer can use the Coronavirus Job Retention Scheme
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