Here is what we know so far.
Please note - we are currently in the process of updating the below guidance in line with new government guidance released on 10 November 2020.
These FAQs deal with the mechanics of furloughing workers under the Job Retention Scheme (JRS) in place during November 2020. The JRS was first put in place to provide employers, whose operations had been affected by Coronavirus, with wage assistance from 1 March 2020. It was originally intended to close on 31 October 2020, however, was extended as a result of the Government’s decision to place England into more severe lockdown measures at the start of November 2020.
On 5 November 2020, the Chancellor announced that the scheme will run until 31 March 2020.
The Job Support Scheme, which was intended to replace the JRS from 1 November 2020, has been postponed and will commence upon closure of the extended JRS. Full details on how the JRS will operate during its extension are still awaited, however, initial details have been published on which this guidance is based. The Government has confirmed that there will be no gap in eligibility for support between the previously announced end date of JRS and this extension.
Please contact us for model letters to use for the extended scheme.
What is furlough?
The JRS involves designating some or all of your employees as ‘furloughed workers’. This means temporarily changing the status of employees so that they do no work, or work for fewer hours than normal, but are retained on your books. It is an alternative to making employees redundant which may otherwise be required due to having no, or little, work to offer your current workforce.
The JRS permits both full and flexible furlough. Full furlough is a period during which employers can provide no working hours to an employee; employers who are under instruction from one of the four UK Governments to temporarily close as a direct result of coronavirus restrictions are likely to need to put employees on full furlough.
Flexible furlough involves a combination of both work and furlough. Employers are likely to use this option when they are not under instruction from the Government to close but are experiencing a reduction in demand and are therefore unable to continue to provide normal working hours to employees. Employers will have flexibility to use the scheme for employees for any amount of time or shift pattern and will be able to vary the hours worked in agreement with the employee.
Employers are able to claim a grant from the JRS to cover a portion of wage costs for hours not worked.
Which employers can use the extended JRS?
All employers with a UK bank account and UK PAYE schemes can claim the grant whether their business is open or closed.
The Government expects that publicly funded organisations will not use the JRS but partially publicly funded organisations may be eligible where their private revenues have been disrupted. The same rules have applied to use of the JRS since it began.
Importantly, employers do not need to have used furlough before in order to use the extended scheme. However, all employers will need to meet the eligibility requirements.
An employee who was on a fixed term contract, on payroll on 23 September, and that contract expired after 23 September can be re-employed and claimed for, provided that the other eligibility criteria are met.
Employees can be furloughed where they are unable to work because they:
are shielding in line with public health guidance (or need to stay at home with someone who is shielding)
have caring responsibilities resulting from coronavirus, including employees that need to look after children.
The JRS is not intended for short-term sick absences. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees.
Furloughed employees who become ill, due to coronavirus or any other cause, must be paid at least SSP. As under the JRS previously, it is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate.
Which employees can be furloughed under the extended JRS?
To be eligible to be claimed for under this extension, employees must be on an employer’s PAYE payroll by 23:59 30 October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made between 20 March 2020 and 30 October 2020.
Employees do not need to have been furloughed before in order to be placed into the JRS during the extension. However, all employees will need to meet the eligibility requirements.
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.
Employees can be on any type of contract and, if the JRS continues to operate in the same way as previously in respect of its scope, this will include workers, agency workers, office holders (including company directors) and salaried members of Limited Liability Partnerships (LLPs) etc.
How much is the grant?
Eligible employers who furlough eligible employees will be able to obtain a grant from the JRS to cover 80% of furloughed employees’ wage costs for unworked hours, to a maximum of £2,500 per employee per month. This level of grant will apply until the end of January 2021 at which point the scheme will be reviewed and grant levels may change. Businesses will be paid upfront to cover wages costs.
When an employee is on full furlough, no wage contribution is needed from the employer.
Previous flexible furlough rules mean that the employer pays the employee for the hours worked and can claim 80% of wage costs for unworked hours to a maximum which is proportionately reduced in accordance with the number of unworked hours.
In both cases, employers can choose to top up pay to the amount the employee would normally receive.
Employers must deduct and pay to HMRC Income Tax and employee National Insurance contributions on the full amount that they pay the employee, including any scheme grant. The JRS grant does not cover employers’ National Insurance contributions or pension contributions.
Employers must also pay to HMRC the employer National Insurance contributions on the full amount that they pay the employee, including any scheme grant.
Will I need to obtain agreement from employees to be furloughed under the extended JRS?
In all cases, you should discuss the situation with employees and agree with them that you are designating them as a furloughed worker, either under full furlough or flexible furlough.
If an employee was on furlough in the period running to the end of October 2020, it is recommended to enter into a new agreement to cover the period from 1 November 2020 rather than relying on an original agreement which could have been in place for months. This is because it could be said that a furlough agreement entered into in April, for example, was foreseen to apply only until the end of the Scheme which was, until the very last minute, set for 31 October 2020. It is recommended that, where furlough is continuing uninterrupted from October into November, that the agreement is refreshed to specifically cover the period from 1 November 2020.
Any flexible furlough or furlough agreement made retrospectively that has effect from 1 November 2020 will be valid for the purposes of a JRS claim. Only retrospective agreements put in place up to and including 13 November 2020 may be relied on for the purposes of a JRS claim. Employers looking to refresh pre-November furlough agreements could use this retrospective approach to confirm the validity of the agreement.
If you had already agreed with employees to be placed into the now postponed Job Support Scheme (Open) or Job Support Scheme (Closed), you will need to revisit the agreement and ensure they agree to be furloughed under the JRS during its extension.
The agreement should cover both changes to working hours and a reduction in pay (if you are not choosing to top up pay to the full amount the employee would normally receive). It should also instruct employees to cease to do all work during the furloughed hours.
There is no minimum furlough period but when claiming the grant for furloughed hours, employers will need to report and claim for a minimum period of seven consecutive calendar days.
Our furlough toolkit contains letters to agree either full furlough or flexible furlough under the extended scheme with employees; to agree full or flexible furlough after the Job Support Scheme had already been agreed; and to confirm continuation of ongoing furlough into November 2020.
How do I calculate reference salary and salary hours?
Employers will need to calculate an employee’s reference salary in order to determine what 80% of it is. When employees are on flexible furlough, it will also be necessary to calculate what their usual hours are so you can record both working and furloughed hours.
For employees on fixed pay employed on or after 20 March 2020, the last pay period prior to 30 October 2020 provides the basis for calculation. For employees on variable pay or hours, employed after 20 March, the average of tax year 2020 to 2021 up to the start of the furlough provides the basis for calculation.
For employees that meet the eligibility criteria, and were previously furloughed, employers must use the same calculations for calculating reference pay and usual hours as the original JRS.
For an employee who meets the criteria of the extended scheme but was not previously eligible for JRS, alternative calculations of reference pay and usual hours must be used. Here, 80% of wages (subject to the applicable cap) must be calculated for employees:
on a fixed salary - 80% of the wages payable in the last pay period ending on or before 30 October 2020
whose pay varies - 80% of the average payable between the start date of their employment or 6 April 2020 (whichever is later) and the day before their JRS extension furlough periods begins.
These dates are inclusive.
If an employee was not previously eligible for JRS and works fixed hours or their pay does not vary according to the number of hours they work, their usual hours will be the contracted hours worked in the last pay period ending on or before 30 October 2020.
If an employee was not previously eligible for JRS and works variable hours, their usual hours will be the average hours worked between
the start date of the 2020 to 2021 tax year, (for example, 6 April 2020)
the day before their JRS extension furlough periods begins
Again, these dates are inclusive.
Can employees take annual leave during furlough from November?
Further guidance is needed on this, however, it is expected that annual leave will operate in the same way as under previous furlough rules. These rules confirmed that annual leave continues to accrue during furlough. Annual leave can be taken during furlough but employers must pay the employee’s normal pay i.e. 100 per cent of normal pay for any annual leave. Wage grants can be claimed during annual leave but will still be subject to the maximum grant available. Employers will be able to require annual leave to be taken, or refuse requests from employees.
During flexible furlough, previous rules confirmed that annual leave taken during working hours will be treated as unworked hours and therefore count towards hours in respect of which wages can be claimed for.
Guidance published on 5 November 2020 confirms that employees will retain their employment rights in relation to annual leave.
Can employees do any work during furlough in November?
Employees cannot do any work for you during their furloughed hours which means any activity that provides services to you or makes money for you or any linked or associated organisation.
Employees can take part in training or volunteer for another employer or organisation. They can find work with another employer when they are on furlough with you provided that their employment contract allows for it.
If the employee undertakes training, they will need to be paid the national minimum wage for those hours but this is offset against the wages payable under the grant.
Can I claim from the extended scheme for employees who are serving their notice?
Some employers may have taken the decision to make employees redundant due to the impact of coronavirus on their business and those employees may be serving their notice period throughout November. The Government is yet to confirm whether employers may make a claim for wage grants under the extended JRS in respect of employees who are serving their notice period.
This scenario was permitted under the original rules of the Job Retention Scheme when someone was made redundant while on furlough, however, it would be wise to wait for clarity on whether someone who is already serving their notice period can be newly placed into the extended JRS.
What do I need to know about making the claim?
Claims can be made from 8am on Wednesday 11 November 2020.
Claims can be made:
in respect of an employee for a minimum 7 day claim window
in arrears for the period from 1 November 2020 to 11 November 2020, from the week commencing 9 November 2020.
Claims relating to November 2020 must be made by 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month. The closing date for claims up to and including 31 October remains 30 November 2020.
The claim period must start and end within the same calendar month. If the pay period includes days in more than one month, each of those claims will need to be calculated separately. Claim periods cannot overlap, and employees claimed for will need to be included in each separate claim made.
An employer can make a claim in anticipation of an imminent payroll run, at the point they run their payroll or after they have run their payroll. There will be a short period when the legal terms of the scheme and system are updated and businesses will need to claim in arrears for this period.
What should I do if I have already agreed with employees that they will be placed into the Job Support Scheme?
Due to the very late confirmation that the JRS was to be extended, some employers may have already taken steps to agree with their employees participation in either the now postponed Job Support Scheme Open or Closed.
Such employers should now re-visit those agreements to confirm to employees that, during their nonworking hours in November and for as long as the extended JRS lasts, or until working conditions change, they will be classed as being on furlough under the JRS, rather than the Job Support Scheme, and the payment arrangements of the extended JRS will apply. The overall result of this is that employees will receive a higher rate of pay under the JRS.
What about TUPE?
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 been employed by their prior employer on or before 30 October 2020, however, at present the date that the employees should have transferred to their new employer is incorrect within the guidelines. This will be updated as soon as we are aware of the correction.