Furlough Scheme Extended While New Applications End on 30 June
'As of May 10, 2020 approximately 7.5 million jobs were furloughed in the UK' (Statista).
On 12 May 2020, the Chancellor Rishi Sunak announced that the Coronavirus Job Retention Scheme would be extended until the end of October. The scheme (which was supposed to end in June) will continue in its current form until the end of June. Changes to the scheme are expected to be introduced from July.
Changes to the scheme from 1 July 2020
On 12 June 2020, the government is expected to announce full details of the changes to the scheme. This page will be updated in due course. In the meantime, we are aware of the following changes that would be introduced:
1 July, flexible working will be introduced whereby furloughed employees can return to work part-time and be furloughed part-time. Their employer will pay their wages for the hours they work, but can apply for the furlough grant to cover the hours they are furloughed for. The government will continue to pay 80% of wages capped at £2,500, as well as employer National Insurance and pension contributions.
From 1 August, employers would be expected to start making contributions toward employees' wages. The government will pay 80% of wages capped at £2,500, but will not pay National Insurance and pension contributions - the employer will have to pay these.
1 September, the government will pay 70% of wages capped at £2,187.50, and employers will have to pay National Insurance and pension contributions, as well as 10% of wages capped at £312.50.
1 October, the government will pay 60% of wages capped at £1,875, and employers will have to pay National Insurance and pension contributions, as well as 20% of wages capped at £625. The scheme will end on 31 October 2020.
From 1 November, employers will resume paying 100% of wages - no more government grant.
Deadline for new applications
The scheme will close to new entrants from 30 June 2020. After that date, employers will only be able to furlough employees that have been furloughed for a minimum of three weeks before that date. This means that employees must be furloughed by 10 June 2020 so that they can be furloughed for the minimum three weeks. The deadline for employers to claim under the scheme for the period to 30 June 2020 is 31 July 2020.
What should employers do?
Employers will have to agree any new flexible furloughing arrangement with their employees from 1 July 2020. We anticipate that a well-drafted furlough agreement should currently prohibit employees from carrying out any work for the employer while they are furloughed. In which case, an employer may have to amend the existing furlough agreement, or enter into a new one, which permits employees to work part-time, while on furlough.
What do these changes mean?
As the government funding will start to reduce from 1 August (and end on 31 October), employers will have to consider whether the business will be in a financial position to sustain the workforce. They need to think carefully about whether they want to commence redundancy consultations now so that they are in a position to make redundancies before the government funding reduces, or ends.
If an employer intends to make more than 20 people redundant, this triggers collective consultation requirements, including minimum consultation periods during which redundancy dismissals cannot take effect. The consultation period for employers who anticipate making 100 or more people redundant is 45 days and for those anticipating making between 20 and 99 redundancies is 30 days.
Government guidance on the CJRS can be found here.
For further information on the furlough scheme or related subjects, please contact us.