A week is a long time when it comes to changes in how the Government plan to support employers as the Covid-19 pandemic continues.
Until Friday 30 October, we were all working to the Job Retention Scheme coming to an end the following day, to be replaced by the Job Support Scheme. This all changed with the Prime Minister’s statement on 31 October 2020 in which he announced an extension to the Job Retention Scheme to early December 2020 and the postponement of the Job Support Scheme.
On 5 November 2020, the Chancellor further extended the operation of the Extended JRS to 31 March 2021 and removed the Job Retention Bonus as it no longer meets the objectives it was designed for.
It is important that employer’s are aware of how the Extended JRS will operate but this is increasingly difficult with the number of changes in policy and regular updates to published guidance (further guidance is expected on 10 November 2020). As of 5 November 2020 we know the following:
- The Job Retention Scheme (JRS) has been extended to 31 March 2021 to give security to businesses through the winter. By the time that the Extended JRS finishes, this could mean that some employees have been on furlough leave for a whole year;
- The Job Support Scheme has been placed on hold until the Extended JRS ends. As a consequence of the Extended JRS, the original purpose of the Job Retention Bonus to incentivise employer’s to keep previously furloughed employees in work until January 2021 has fallen away. The Job Retention Bonus will not now pay out any bonus in February 2021 and has been postponed;
- For those employers with a UK bank account and PAYE scheme, the Extended JRS will operate as follows:
- The level of grant will mirror that available under the JRS in August 2020, with the government paying 80% of the employee’s ‘usual’ wage up to a cap of £2,500 per month (being 80% of £3,125), with the employer bearing the Employers’ NIC and pension contributions on such amounts. This grant payable by the Government under the Extended JRS represents an increase compared with the September and October grants under JRS.
The Chancellor will review the terms of the Extended JRS in January 2021 to determine whether employer’s should bear more of the cost;
- Flexible furloughing is permitted such that employers can claim the Extended JRS grant for the hours their employees are not working as a proportion of their usual hours;
- An employer may top-up employee wages above the scheme grant at their own expense if they wish;
- The Extended JRS is open to all eligible employees who have been included on an RTI submission made to HMRC on or before 30 October 2020. There is no requirement that an employee who is to be placed on furlough leave under the Extended JRS must have previously been placed on furlough leave on or before 10 June 2020.
Employee’s unable to work because they are shielding in line with health guidance or have caring responsibilities resulting from covid-19 (including looking after children) can be furloughed. Further, there are special rules permitting an employer to re-employ and claim for an employee who was on their payroll on 23 September (and for whom an RTI submission was made between 20 March 2020 – 23 September 2020). An employer will however still bear the cost of the employers’ NIC and pension contributions for such re-employed person and employment law advice is recommended;
- For employee’s who have previously been furloughed under the original Job Retention Scheme, the same basis periods will apply to determine relevant pay and usual hours worked. For employee’s who are being furloughed for the first time by their employer as part of the Extended JRS, relevant pay (and usual working hours if applicable) for a fixed pay employee are determined by reference to the last pay period ending on or before 30 October 2020. For a variable paid employee, relevant pay (and usual working hours if applicable) will be determined by reference to the average of both from when the employment started (or 6 April 2020 if later) and the day before their furlough leave under the Extended JRS begins.
- Amounts claimed under the Extended JRS by the employer will be included as income in the employer’s calculation of taxable profits for Income Tax and Corporation Tax purposes while the wage paid plus the associated costs (see above) can be claimed as deductions. The Apprenticeship Levy and Student Loans should continue to be paid as normal.
- The first claims under the Extended JRS (of which the start and end date must be within the same month) can be made from 11 November 2020 and may be made in advance. Claims relating to November 2020 must be made by 14 December 2020. Claims relating to each subsequent month must be submitted by day 14 of the following month. The minimum claim period is 7 consecutive calendar days.
A new written agreement must be entered into with each employee confirming their furlough leave arrangement (whether full furlough or flexible furlough) under this Extended JRS. The written agreement must be kept for 5 years and records should be kept of how many hours a furloughed employee works and the number of hours that they are furloughed. The new written agreement must be in place before the employee starts their furlough leave although the Policy Paper published on 5 November 2020 permits the written agreement to be entered into retrospectively up to 13 November 2020 for any furlough leave that started from 1 November 2020.
A furloughed employee has the same employment rights as they had previously. An employer does not have to place all employees on furlough. Employers should note that the non-discrimination laws continue to apply.
As amendments to Government policy and HMRC guidance is changing regularly, where an employer intends to operate the Extended JRS, they must monitor HMRC updates to ensure compliance.
PEM has extensive experience of assisting clients with the Job Retention Scheme. Please contact email@example.com or your usual PEM contact if you would like to find out more.