Changes to Coronavirus Job Retention Scheme June 2020
The Government has confirmed that their Coronavirus Job Retention Scheme will continue until the end of October – but with important changes to the scheme from July.
Currently employees are able to be furloughed in blocks of three weeks at any one time and employers can claim up to 80% of an employee’s wages to be covered by the government grant, up to a maximum £2,500. Staff are then ‘furloughed’ – which means they are not allowed to work at all during this period.
Statistics from the Government published last week, revealed 8.4 million workers and around one million businesses are signed up to the scheme in the UK since applications opened on the 20th April.
The Job Retention Scheme will now continue for at least another four months. However, changes have now been announced which aim to provide flexibility for people to be able to go back to work, but will require employers to make increased financial contributions to ensure employees receive up to 80% of their salary.
For the next two months the Government will continue to pay the full 80%, with the employer required not to pay anything.
From the start of July, furloughed workers will be allowed to return to work part-time, but with their employers asked to pay their salaries while in work – this has been brought forward by the Government by one month. Claims from July onwards will also be restricted to employers currently using the scheme and previously furloughed employees. The scheme will close to new entrants on 30th June 2020. However, the employer must place the employee on furlough on or before 10 June 2020 in order to take, or continue to take, advantage of the scheme. This is the date set by the government to ensure that employees serve a minimum of 3 weeks on furlough at any one time in order to be eligible to recoup the payments.
Then in August, although the Government will maintain the 80% payment, every employer will be expected to pay their workers ER National Insurance Contributions (NICs) and pension contributions – which on average represents 5% of the normal employment costs incurred.
In September the Government guarantee will start to reduce, with 70% of wages centrally covered up to a cap of £2,190.00. Employers will pay ER NICs and pension contributions and 10% of wages to maintain the 80% total, up to a cap of £2,500.
Then in October, which will be the final month of the scheme, the Government will pay 60% of wages, up to a cap of £1,875. Employers will then be expected to fulfil the necessary contributions and 20% of the wages to maintain the 80%, up to the threshold.
This payment will be used to substitute the grant contribution currently made by the Government, while ensuring the employee continues to receive 80% of their salary, up to the £2,500 threshold.
Although it’s hoped this will allow businesses to gradually reintroduce their workforce back into action as the economy restarts after lockdown, there is sure to be concern from organisations about the level of their recovery after such a long period without income, and whether they will be able to take back the burden of these wages. With reports of rising unemployment and record-levels of Universal Credit applications there is natural concern that more people could lose their jobs in the coming months if economic recovery is slow.
Below we have included a summary of some of the key points regarding the way the Scheme currently works.
- Employers will be entitled to a grant from HMRC equal to 80% of monthly wage costs up to £2,500, plus National Insurance Contributions and minimum pension contributions on that wage.
- You will need to apply for any grant through the HMRC online portal system.
- Claims can be backdated to 1st March 2020 but only employees who were on the PAYE payroll on 19th March 2020 shall be eligible.
- Employers have the option to top up an employee’s salary beyond the 80% grant, but is not an obligation under the scheme.
- To be eligible to make a claim under the scheme, you must have sent written confirmation to your affected employees, confirming that they have been furloughed and you should keep a copy of this.
- Employees must be furloughed for a minimum of three weeks and the scheme is to be open until the end of October. Claims from July onwards will be restricted to employers currently using the scheme and previously furloughed employees. The scheme will close to new entrants on 30th June 2020, with the last three-week furloughs before that point commencing on 10th June 2020.
- You can only submit a claim once every three weeks.
- Any UK organisation shall be eligible provided they had a payroll in place on 19th March 2020 and a UK bank account.
- Administrators working through administrations can also apply.
- Employees on any type of contract shall be eligible, whether that is full-time; part-time; agency or flexible/zero hours.
- Any staff made redundant after 19th March 2020 will also be eligible provided they are rehired.
- During the furlough period, employees must not undertake any work for, or on behalf of, the organisation.
- Wages received during the furlough period shall continue to be subject to the usual income tax and other applicable deductions.
- The employment contract must be varied by agreement, confirmation must be made in writing to the employee and a record kept of this communication.
- Equality and discrimination laws will continue to apply to those being furloughed and during the furlough period.
- Those employees on sick leave or self-isolating should receive SSP but may be furloughed after this. Those shielding in line with public health guidance can be placed on furlough.
- A furloughed employee is able to take part in volunteer work or training, provided they do not provide services to, or generate income, for or on behalf of the organisation.
The above is a summary of some of the key aspects of the latest guidance. The full government guidance is also available here.
For those self-employed, the self-employed grant is being extended, with applications opening in August for a second and final grant payment. There will be parity with the reducing furlough scheme, paying 70% (not 80%) of average earnings up to £6,750.00.
If you have any questions about furlough or need assistance implementing it with your staff, please contact our employment team on 01603 620508.
This article was produced on the 1st June 2020 by our Employment team for information purposes only and should not be construed or relied upon as specific legal advice.