The Government announced yesterday that the Coronavirus Job Retention Scheme (what we call the furlough scheme) will now be extended until 31 March 2021. We have had a lot of questions about how this all works and here we set out what we know so far.
1. Under the furlough scheme, employers can claim 80% of employees’ wages, capped at £2,500, for hours not worked.
2. Employers have to pay the national insurance and employer pension contributions on employees’ furlough pay.
3. The Government is going to review the level of employer contributions in January 2021. So, it is possible that employers may have to contribute more after the review.
4. Employers do not need to have used the furlough scheme previously and can claim whether their business is open or closed.
5. Employees can be fully or flexibly furloughed.
6. For employees to be eligible for the furlough scheme, the employee must have been on the employer’s payroll on 30 October 2020. The employee does not need to have been furloughed previously.
7. Employees who were made redundant or stopped working for their employer after 23 September 2020 can be re-employed and claimed for under the scheme.
8. Employers will be able to claim for the period from 1 November from 8.00 am on 11 November 2020.
9. Employers should discuss furlough with their staff and make any changes to the employment contract by agreement. To claim under the furlough scheme, employers must have confirmed in writing to their employee (or reached collective agreement with a trade union) that they have been furloughed. The employee does not have to provide a written response.
10. The Job Support Scheme has been “postponed”. We do not know whether it will be introduced after the furlough scheme ends.
11. The Job Retention Bonus has been deferred and we understand a new retention incentive scheme will be introduced at a later date.
So, what does all this mean for employers? It will come as a welcome relief to many who were having to consider redundancies due to the new lockdown. It gives employers breathing space whilst these challenging economic times continue.
The key will be making sure that employers comply with employment law when putting people on furlough (which means having a written agreement in place with the employee for them to be placed on furlough) and ensuring you keep the agreement as evidence for HMRC.
We also understand that more guidance will be published on 10 November 2020. So, watch this space.