On Friday 20th March 2020, the Chancellor of the Exchequer announced the Coronavirus Job Rentention Scheme (CJRS). It introduced an entirely new concept into UK employment law, Furlough Leave. Rather than dismiss an employee or make them redundant, an employer can place the employee on furlough leave with part of their wages covered by the government in the form of a grant. It was envisaged that the scheme would only run until 31 May, but it has since been extended to 31 October, albeit in a revised form.
Currently if an employee is placed on furlough leave:
- They cannot do any work for their employer; but
- They remain an employee on payroll and continue to accrue continuous service; and
- HMRC will reimburse 80% of furloughed workers wage costs (capped at £2,500 per month per employee) plus employer's NIC's and minimum enrolment employer pension contributions on that wage if the employer makes a claim.
- The furlough scheme is open to all UK employers that had created and started and PAYE payroll scheme on 28 February and enrolled for PAYE online
- The furloughed employee must have been on the employer's PAYE payroll on or before 19 March 2020, and an RTI submission notifying payment in respect of that employee must have been made to HMRC on or before 19 March 2020.
The above arrangements will continue to 30 June. The scheme will then be closed to new applicants, which means in reality in order to get 3 weeks continuous furlough leave in in order to claim the grant any new employees need to be furloughed by 10 June at the very latest.
From 1 July, employers can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked. When claiming the CJRS grant for furloughed hours; employers will need to report and claim for a minimum period of a week.
From August the grant provided through the CJRS will be tapered:
- June and July: The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.
- August: The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICS and pension contributions.
- September: The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICS and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had th employee not been furloughed.
- October: The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICS and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had th employee not been furloughed.
Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked.
The CJRS was largely welcomed by employers. It has supported the wages of between 8-11 million workers, although concern has now been expressed about the requirement for employers to now make a contribution. Some businesses (especially hospitality) are not currently able to trade, and have little or no income and so there is a concern that redundancies may now be inevitable.
This article is intended as general guidance only, employers and employees should refer to the government guidance at www.gov.uk.
Sarah Rushton is a partner and head of employment at Moon Beever LLP and can assist with all employment relatd matters you can contact her at firstname.lastname@example.org.