Furlough scheme extended as England gets set to enter new lockdown
03 November 2020
The prime minister Boris Johnson has announced that the Coronavirus Job Retention Scheme will be extended rather than closed as originally planned. The extension will cover a new lockdown in England which is expected to come in on 5 November 2020 and last until 2 December 2020.
The Coronavirus Job Retention Scheme (or furlough scheme) was originally planned to end on 31 October 2020, with the replacement Job Support Scheme (JSS) set to launch immediately on 1 November 2020. In a last-minute change of plan, however, the prime minister announced that the furlough scheme is to be extended, having previously resisted calls for such an extension. Further details and guidance are expected, but here is a summary of the immediate questions and implications for employers:
- To avoid having two schemes running simultaneously, the JSS has been delayed and will now launch when the new furlough extension ends.
- The extended furlough scheme will continue until the English lockdown restrictions are lifted in December. It is unclear exactly when the furlough scheme will now end, but the lockdown restrictions look set to be in place until 2 December 2020. The government will pay up to 80% of an employee’s normal pay, capped at £2,500 and employers will be responsible for National Insurance contributions (NICs) and pension contributions.
- The existing furlough scheme was in the final stages of being wound down. For the last three months the government contribution has been reducing while the employer contribution has been increasing. For October, the current maximum government contribution under the furlough scheme was 60% of normal pay (up to a cap of £1,875) and the employer contribution was 20% (up to £625). However, the extended furlough scheme will put the clock back to how things were in August, when the government contribution was 80% of wages up to a cap of £2,500 and employers just paid employer NICs and pension contributions
- Flexible furlough will continue to be an option, so employees can work part-time and receive a furlough grant for unworked hours.
- The JSS was divided into two parts – JSS Open (for businesses operating where employees are working at least 20% of their usual hours) and JSS Closed (where the business is legally required to close its premises and employees have no work to do at all). Under JSS Closed, the government would have paid 67% of employee wages, up to a maximum of £2,083.33 a month. Under JSS Open, the position was more complicated but the government contribution was capped at a maximum of £1,541.75 per month and the employer contribution was capped at £125 per month. This means that the extended furlough scheme is more generous than both JSS Open and JSS Closed.
- The government has widened the furlough scheme so that, to be eligible under this extension, employees must simply have been on an employer’s PAYE payroll before midnight on 30 October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HM Revenue & Customs must have been made on or before that date. This will come as particularly welcome news for those employees who have never qualified for furlough but who would have been eligible for JSS, including recent starters and employees who carried on working throughout the pandemic and never stopped work for three consecutive weeks before 1 July (a pre-condition of eligibility for the furlough scheme after July).
- HMRC has subsequently confirmed (although it is not included in the published announcement) that, if employees were on your payroll on 23 September 2020 (i.e. notified to HMRC on an RTI submission on or before 23 September) and were made redundant or stopped working for you afterwards, they can also qualify for the scheme if you re-employ them. Even if re-hiring is allowed, however, employers will not be under any obligation to re-hire and should take legal advice before doing so.
- It is also unclear how the furlough extension will interact with the Job Retention Bonus, which provides that employers who bring workers back from furlough and retain them in employment until the end of January 2021 will qualify for a £1,000 bonus. Under the current rules of the bonus scheme, the employee needs to be kept in employment and paid a minimum amount for November, December and January. It remains to be seen whether furlough pay will count towards the minimum - the government had confirmed that JSS pay would count so in principle it seems likely that furlough pay also should - or if the government will now amend the bonus scheme.
- Many businesses had already put in place JSS Open agreements in anticipation of the scheme’s launch on 1 November 2020. Those businesses should contact affected employees as soon as possible to explain that the government has made a late decision to extend the furlough scheme and to ask them to agree to continue being on furlough instead. Some possible wording that such employers might wish to use is provided below.
Possible wording for urgent communication to employees:
You may have seen that the government has made a last-minute decision to extend the furlough scheme. The government has said that the extended furlough scheme will remain open until December 2020. As a result of this extension, the start of the Job Support Scheme (JSS) will be delayed so that it starts after the end of the extended furlough scheme.
[For an employer where there is already a JSS agreement in place] Although we are grateful to you for agreeing to enter into the JSS scheme, we now need to ask that you agree to be furloughed until December 2020 instead. This has the advantage of ensuring that you receive a higher percentage of capped pay than was available under the JSS scheme. I should be grateful if you could reply to this email confirming your agreement to remain on furlough until December on the existing furlough pay [and hours].
[For an employer where no JSS agreement is in place and employee already on furlough]: As you are already on furlough/flexi-furlough, we propose to continue the existing furlough arrangements until December 2020. I should be grateful if you could reply to this email confirming your agreement to remain on furlough until December on the existing furlough pay [and hours].
[For an employer where no JSS agreement is in place and employee not on furlough]: Given the impact that the lockdown is likely to have on our business, we would like to ask that you to agree to be furloughed/flexi-furloughed until December 2020. I have attached a letter setting out the arrangements we would ask you to agree. This reflects the arrangements we have in place with other furloughed employees.
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