The Chancellor, Rishi Sunak, has announced a series of changes to the Coronavirus Job Retention Scheme (CJRS) from July that will see furloughed employees able to return to work part-time, but with the value of Government support reducing gradually from August.
Rishi Sunak, Twitter feed 29 May 2020
The changes in summary
- The scheme will remain in its present form for those who need it until the end of July with no additional costs to the employer.
- From August the employee will still receive 80% of wages when fully furloughed but the employer will no longer be able to reclaim the pension and NI contribution – they will have to meet that as usual.
- From September the employer will be required to pay the pension and NI together with 10% of the 80% furlough wages that the employee receives.
- From October that contribution from the employer will increase to 20%.
- From 1 July there will be the introduction of a flexible furlough scheme where employees may be asked to come in to work on full wages for part of the week and receive the 80% of wages for the time they are not working (subject as above to the contributions set out).
The changes to the scheme
A system of ‘flexible furloughing’ will come into effect from 1 July, allowing employers to bring back furloughed employees for any amount of time on any shift pattern, while still able to claim a grant in respect of the time not worked when they otherwise would.
Employers will have to pay employees at their usual rate of pay for any hours they work, while also covering the cost of Employer National Insurance Contributions (NICs) and minimum employer automatic enrolment pension contributions that this pay attracts.
They will need to reach new flexible furlough agreements with any furloughed employees brought back on a part-time basis.
From 1 August, CJRS grants will cease to cover Employer NICs and pension contributions, with this cost passing to employers. The grant will continue to cover 80 per cent of furloughed employee’s usual wages, up to a cap of £2,500 a month.
However, from 1 September, the value of the grant will fall to 70 per cent of a furloughed employee’s usual wages, capped at £2,187.50 a month. Employers will be expected to contribute the remaining 10 per cent plus NICs and pension contributions to reach a combined total payment to the employee of 80 per cent of their usual wages, up to a cap of £2,500 a month.
October will see the value of the Government contribution fall again to 60 per cent, capped at £1,875 a month, with employers expected to contribute 20 per cent of a furloughed employee’s usual wages plus NICs and pension contributions to reach the total of 80 per cent, capped at £2,500 a month.
At the same time, the Chancellor confirmed the closure of the scheme to new entrants from 30 June. After this point, employers will only be able to furlough employees who have been furloughed for three full weeks at any point before 30 June.
This means the last day an employer can furlough an employee for the first time will be Wednesday 10 June.
Furthermore, after 30 June, employers will not be able to claim for more employees in a claim period than the maximum number they have claimed for in any period under the scheme in its current format.
Full details of how the scheme will operate from this point are expected to be announced on 12 June 2020.
- In July you may ask an employee to return from furlough for 2 days per week. You will pay them 100% of their normal wages for those 2 days and you can still claim the other days at 80% plus pension and NI contributions
- In August you may bring back more employees (or increase or decrease days of work) from furlough on, say, 3 days per week. You will pay those employees 100% of their normal wage for those 3 days. For the 2 days they are not at work you can claim 80% of their wages but you will have to pay the pension and NI contribution
- In September you bring back more employees on flexible furlough working 3 days per week. You will pay 100% of wages for the days worked but will still be able to claim 70% of the employee’s wages for the days they do not work. You will, however, HAVE to pay 10% of their 80% wages (their income does not go down) and the employers’ NI and pension contributions
- In October the employer contribution increases to 20% plus pension and NI and then closes on 31 October.
The announcement comes against the background of an easing of the lockdown restrictions that have closed down large sections of the economy since late March, with the Government now encouraging certain sectors back to work.
Guidance still to work from home, where possible
Where it is possible to do so the Government guidance is that working from home should continue for those who are able to do so. People furloughed because of shielding (which has been extended for the foreseeable future) or because of childcare issues will be paid as set out above.
However, those who are struggling with childcare issues should be able to potentially return at least part time when schools and nurseries and other childcare settings such as childminders are allowed to open again. HOWEVER it is important to bear in mind that with July comes the school holidays and for many it is grandparents who bear the burden of childcare. We do not yet know whether restrictions will be lifted enough by then for grandparents to take on their usual caring roles.
CJRS and record keeping.
The CJRS was announced by the Chancellor in March and currently allows employers to furlough any employees who were on a PAYE payroll and reported to HM Revenue & Customs (HMRC) through the Real-Time Information (RTI) system by 19 March 2020.
Since then, more than a million employers have collectively claimed £15 billion from the scheme in respect of 8.4 million employees, via the Government’s online portal.
The announcement comes days after the Chancellor issued a new Direction to HMRC, updating the record-keeping requirements of the scheme.
Under these requirements, the written agreement that the furloughed employee will, under the current terms of the scheme, cease all work must be retained until 30 June 2025 and:
- State the main terms and conditions;
- Be incorporated either expressly or implicitly in the contract of employment; and
- Be either made or confirmed in writing.
It is widely expected that HMRC will audit use of the scheme retrospectively over the coming months and years, with potentially hefty penalties for those found to have acted improperly.