Extension of the furlough scheme and what you need to know

Note: This article was edited on 5 November 2020 to reflect the Chancellor’s extension of the CJRS until March 2021.

 

The UK Government has announced that a second national lockdown will take place from 5 November until 2 December. This means certain businesses will have to temporarily close. Undoubtedly, employers and employees will be worried about what this means for their businesses and jobs.

Find out what actions have been taken by the Government to provide economic support and relief for businesses and employees affected by the new restrictions in this blog.

 

What is the current update?

The decision has been made to extend the Coronavirus Job Retention Scheme (also known as the furlough scheme) until March 2021 to support businesses that are affected by the new restrictions.

Previously, the furlough scheme was due to end on 31 October and be replaced by the Job Support Scheme (JSS) on 1 November. The start of the JSS has now been delayed until the furlough scheme ends.

 

What’s new about this extended Scheme?

Whilst the details of the extended Scheme are largely the same as the original furlough scheme, there are two crucial things you should know:

  1. to be eligible employees must have been on the employer’s PAYE payroll before 30 October 2020
  2. neither the employer or employee needs to have used the furlough scheme in the past to be eligible under this extension

 

What are the other details of the Scheme?

  • The Government will pay up to 80% of an employee’s usual salary for hours not worked, which will be capped at £2,500 per month.
  • Employers will only be responsible for paying NI contributions Cs and pension contributions.
  • Employers can voluntarily top up employee salary.
  • Flexi-furlough is still an option, meaning employers can reduce the hours employees work, paying them only for the hours worked and using the furlough scheme to cover hours not worked.

 

How can I participate in the Scheme?

  1. Designate affected employees as ‘furloughed’. Employees who cannot work from home and who currently have no work to do will be obvious candidates for furloughing. Otherwise, you may need to consider a process of calling for volunteers, pooling and selection (as with a redundancy process). There is a risk of claims (eg discrimination claims) if the process is not handled correctly.
  2. Notify ‘furloughed’ employees by using a Furlough letter to employees. Keep this communication on record for 5 years.
  3. Once employees have accepted their new status, write to them to confirm they have been furloughed by using a Furlough leave confirmation letter. Keep this communication on record for 5 years.
  4. Submit details about which employees have been ‘furloughed’ and their earnings to HMRC through the online portal.

 

A point worth bearing in mind is that under the extended furlough scheme employers will continue to be paid upfront to cover wage costs. However, there will be a short period where businesses will be paid in arrears while the terms of the extended furlough scheme are being amended and the systems updated by the Government.

Employers can rehire employees that have been made redundant and then put them onto the furlough scheme. However, this only applies to those employed as of 23 September and the employee must have been on the employer’s payroll on or before 30 October.

 

How can Rocket Lawyer help me?

Sara Domi

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