It was a big day for announcements by Mr Sunak last Friday when he revealed updates to the Coronavirus Job Retention Scheme (“CJRS”) and Self Employed Income Support Scheme (“SEISS”) at the daily press conference.
Today I will look at the forthcoming changes to the CJRS.
Mr Sunak had previously indicated that there would be changes to the CJRS from 1 August, but Friday’s announcement also contained significant changes to the scheme from 1 July.
These changes can be divided into two different aspects – the ability to claim grants for employees who are working part-time (as from 1 July) and the gradual reduction in the amounts of furlough pay which will be covered by the grants (from 1 August to 31 October). It had previously been stated that the scheme will end on 31 October, and that remains the case.
Part time working (“flexible furlough”)
Up to now it has been a fundamental feature of the scheme that for staff to qualify for the CJRS grants, they must not perform any work for their employer, subject to minor exemptions for training and voluntary work and, in the case of directors, carrying out their “statutory duties”. However from 1 July it will be possible for employees to carry out their usual duties for their employer on a part time basis, for whatever amount of time and shift pattern, that is agreed between them.
The grant will be available for the non-working hours which they would normally work, and the employer must pay the usual salary for the hours worked. It is important to note that the claims must be based on the normal, pre-pandemic hours, meaning that it will not be possible for employers to (say) change a previous 4 day per week employment into 5 days per week, get the employee to work for two days and claim the grant for the three non-working days – in this case the grant can only be paid for the two non-working days according to the pre-pandemic work pattern.
As you may recall, the rate of payment of the grant has generally been based on a historic rate of pay (usually the rate as at 28 February) and it is likely that this will continue, although this has not been specified yet – the Government has promised that further details will be published on 12 June. It will be necessary for new furlough agreements to be entered into with affected staff, and the minimum period for which a claim can be made will reduced from three weeks to one week. It is not clear yet whether this means that employers will be able to “wait and see” what their requirement for staff will be on a weekly basis, so that they can bring people in if they have enough work for a week, and then “re-furlough” them, either partly or fully, if there is no work for the next week, etc., etc. That would certainly be very helpful for employers in many sectors, enabling them to bring back staff flexibly without having to commit to a permanent change until the end of October.
The use of “flexible furloughing” could be used in two different scenarios – for those employees who have already been furloughed but could be usefully brought back to work for less than their full hours, and those who have continued to work (and be paid) on a full time basis, but who do not have enough work to do and for whom their employer would prefer to drop their hours. The procedure for the former category will be quite straightforward – it will simply be a matter of reducing the CJRS claim for those people to reflect their reduced furlough time, with their working time being paid for by their employer in accordance with their contractual terms for those working hours. However for the latter category, who have not been claimed for before, the Government have stated that only staff for whom a claim has been made for a period before 1 July can start to be furloughed on a part time basis when that becomes available from 1 July. That effectively means that a claim has to have been made for at least the three weeks ended 30 June for those employees to be included in a post-30 June claim, and therefore such employers must, as a matter of urgency, review their workforce and decide whether they will want to put any staff who are currently not furloughed onto part time furlough when that becomes available (after 30 June). If so, those people must be furloughed from Wednesday 10 June at the latest so that they can clock up the requisite 21 days furlough period for a claim to be made to 30 June, and they will of course have to be fully furloughed for that period because the part time arrangement will not be available until 1 July. This will be an important and potentially difficult decision for many employers, and needs to be given early consideration.
Reduction in amount of grants
This is a different provision from the “flexible furlough” outlined above, and will start on 1 August with three monthly reductions as follows.
- From 1 August, the grant will no longer cover the employers’ national insurance contributions or pension payments, but only the salary element. The Government suggest that this is on average about 5% of the amounts which are being claimed.
- From 1 September, the grant will only cover 70% of salary, reduced from 80%. The employer will be required to pay the balance of 10% and the monthly grant “cap” of £2,500 will be reduced by the same proportion to £2,187.50.
- From 1 October, the grant will only cover 60% of salary and the employer will be required to pay the balance of 20%. The cap will be reduced by the same proportion to £1,875.
In the case of employees who have moved to flexible furlough, the grants will of course only cover their non-working time.
As with the current scheme, the employer will be free to make up the 80% which must be paid (grant plus 10% or 20% employer contribution) to the full rate of pay.
This analysis is based on the guidance released following Mr Sunak’s announcement last Friday, but there are many areas which will be in need of clarification and, as mentioned above, the Government will be publishing full details of the new scheme on 12 June. We therefore hope that any uncertainties will be dealt with at that time.
Author: Peter Hedgethorne, Director, Plus Accounting
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Date Published: 02 June 2020