The end of October was nothing but dramatic in the employment law world. Hours before the Coronavirus Job Retention Scheme (CJRS), also known as ‘furlough’, was due to close, the Government announced it would extend the scheme until 31 March 2021.
The Chancellor, Rishi Sunak, had previously reiterated that the furlough scheme would not be extended against a backdrop of calls from employers warning that unless the Government intervened, mass redundancies would be inevitable. The lockdown restrictions that came into force in England on 5 November 2020 seemed to have tipped the balance in favour of extending the scheme.
Unfortunately, many employees had already lost their jobs in anticipation of the furlough scheme ending on 31 October 2020.
In a further turn of events, HMRC confirmed on 2 November 2020 that employers could re-employ dismissed employees, where such individuals had been on the payroll on or before 23 September 2020 (i.e. notified to HMRC on a Real Time Information (RTI) submission on or before 23 September 2020).
For any claims for the period starting from 1 November 2020, employers are able to claim for employees who were employed and on the payroll on 30 October 2020 (they must have made a PAYE RTI submission between 20 March and 30 October 2020).
The scheme will be reviewed in January 2021, when the Government will decide whether employers will be asked to make a greater contribution to employees’ salaries.
There has been a slight modification from the original Treasury Guidance regarding the purpose of the scheme. According to the latest Treasury Guidance, employees can be furloughed if you “cannot maintain your workforce because your operations have been affected by Coronavirus”. The wording would seem to be wide enough to cover situations where redundancies can be avoided in the short term, even if in the long term jobs are not viable.
The main points of the CJRS extension are:
• The grant is available for all businesses, regardless of size, as long as the employer has a UK bank account, operates PAYE and makes a Real Time Information (RTI) submission to HMRC.
• From late November, HMRC will publish the names of companies and LLPs claiming the grant with an indication of the value of the claim. This measure is intended to deter fraudulent claims, but there has been growing concern that organisations could be targeted or subjected to threats and at risk of harm if ‘named and shamed’ as proposed.
• For claims starting from 1 November 2020 there is no requirement for employees to have been previously furloughed and there is no limit to the number of employees an employer can furlough.
• The grant will cover up to 80% of furloughed employees’ salary for hours not worked, up to a maximum of £2,500.
• There is no obligation for an employer to place employees on furlough and many employers may not be able to, as it is not a cost neutral option. Employers remain liable for employee National Insurance and pension contributions as well as payments for statutory sick pay, holiday, maternity and other parental rights.
• The grant cannot be used by an employer to pay for redundancy payments and from 1 December, employers cannot claim for any days during which a furloughed employee is serving a contractual or statutory notice period.
• Flexible furlough continues to apply so that employees can come back to work on a part-time basis, but employers will need to ensure that they claim for a minimum of 7 calendar days to qualify for the grant.
• It is important that whilst on furlough, employees do not do any work that makes money or provides services for the employer or its associated companies.
• Employees who are unable to work because they are shielding or have caring responsibilities can be furloughed.
• Employers must continue to obtain the express consent of employees to place them on or to extend any existing period of furlough.
It is unclear whether the lockdown measures in force in England until 2 December 2020 will be extended. The Health Minister, Matt Hancock, has publicly stated that he is unable to rule out an extension. This will no doubt have an impact on any future modifications to the furlough scheme when it is reviewed in January 2021.
For further information on the issues raised in this alert, please contact Partner Merrill April or Senior Consultant Pia Sanchez, both of whom specialise in employment and partnership law for senior executives, multinational employers, partnerships and partners.