1 June 2020
On 29 May 2020, the Chancellor made some significant changes to the Coronavirus Job Retention Scheme (the “Scheme”). In this update, we provide details of the changes and the key points for employers to consider.
1. Flexible Furlough
From 1 July 2020, you can bring employees back to work that have been previously furloughed for any amount of time and for any shift pattern.
You can reclaim under the Scheme for any hours which employees who are on flexible furlough do not work. The minimum period for a claim after 1 July 2020 is one week. It will be very important to keep a log of the hours which are worked and not worked by each employee.
This is a welcome change to the Scheme which will allow you more flexibility in terms of gearing up your workforce as the economy, hopefully, picks up pace without adding too much pressure to your cashflow. There was a real concern that if employers were left with an all or nothing option for taking employees off furlough, they would have significant outgoings before their incomings had been built up.
The introduction of flexible furlough will also allow you to ease employees back into the workplace. Many employees will have been out of the workplace for three months or more and are likely to need some training to remind them of systems and processes. Simple things, such as passwords for computers, may have been forgotten.
Further guidance on Flexible Furlough will be published on 12 June 2020. We will provide more details shortly after.
2. Closing of the Scheme for New Entrants
The Scheme will close to new entrants from 30 June 2020.
This means that your employees must have been furloughed for a full three week prior to 30 June. It appears that an employee who has been previously furloughed for at least three weeks, but is now working, can be furloughed after 30 June 2020 and will be eligible for the Flexible Furlough.
If you want any employees who have not already been furloughed to be eligible for Flexible Furlough, they must be placed on furlough leave by 10 June 2020 so as to have the three-week qualifying period by 1 July 2020. Anyone who is new entrant will still be required to have been on your payroll by 19 March 2020 to qualify for the Scheme in the first place.
3. Contributions under the Scheme:
The Chancellor confirmed that the government will make the following contributions to the Scheme. The contributions are generous and will hopefully reduce the number of redundancies that businesses are likely to need to make.
There has been some criticism that there is not more support for certain sectors, such as entertainment or hospitality, as some employers will not be able to afford even the most basic contribution when they have no income at all. It does not appear, at this stage, that there will be any industry specific measures.
a. June and July
No change to the current Scheme
The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions.
You will not have to contribute anything unless you are topping up your employees’ wages.
The government will pay 80% of wages up to a cap of £2,500.
You will be required to pay ER NICS and pension contributions. If you top up your employees’ wages, you will continue to bear this cost.
The government guidance states that for the average claim, the contribution which will be made by employers represents about 5% of the gross employment costs an employer would have incurred had the employee not been furloughed.
The government will pay 70% of wages up to a cap of £2,187.50.
You will pay ER NICS, pension contribution and 10% of wages to make up the 80% total up to the cap of £2,500. If you top up your employees’ wages, you will continue to bear this cost.
The government guidance states that for the average claim, the contribution which will be made by employers represents about 14% of the gross employment costs an employer would have incurred had the employee not been furloughed.
The government will pay 60% of wages up to a cap of £1,875.
You will pay ER NICS, pension contribution and 20% of wages to make up the 80% total up to the cap of £2,500. If you top up your employees’ wages, you will continue to bear this cost.
The government guidance states that for the average claim, the contribution which will be made by employers represents about 23% of the gross employment costs an employer would have incurred had the employee not been furloughed.
4. End of the Scheme
The Scheme will end on 31 October 2020.
Please note that the guidance for the Scheme is regularly changing and we therefore recommend that you double check the position with us.
For further information, please contact our Jack Gardener or Gill Brown in our Employment team.
Alternatively click here to go to our contact page.
1 June 2020
Phillips Solicitors Limited
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