June 1, 2020
Last Friday evening, as many of us were thinking of our plans for the sunny weekend ahead, the Chancellor, Rishi Sunak, finally announced that the Government’s furlough scheme – the Coronavirus Job Retention Scheme – will come to an end on 31st October 2020. By the end of October, the Scheme will have been in place for 8 full months. There had been much speculation about how the furlough scheme would be phased out in advance of this announcement and many of the reports beforehand in the national press proved to be inaccurate. Now we have the key takeaway points:
· Employers will have until the 10th June 2020 to place any employees on furlough leave. After this date employers will not be able to be place employees on furlough leave, so employers should now act quickly if they want to access the Scheme. This may be particularly relevant where employers had implemented a system of rotating employees in and out of furlough leave.
· From July 1, the changes to the scheme will begin to take effect and from this date, furloughed employees will be able to return to work part-time whilst still being furloughed part-time. Some are calling this ‘flexi-furlough’ and our current understanding of how this will work is that businesses will decide what time an employee spends furloughed versus time spent working.
· From August 1, employers will have to pay employees’ national insurance and pension contributions. These will no longer be able to be claimed through the scheme.
· From September 1, the scheme will only cover 70% of salary, i.e. up to a maximum of £2,190. However, employers will need to ensure that employees are still paid at least 80% of their pay. This may mean a top-up of 10% where an employee is being paid 80% of salary, or more if the employer has previously agreed to pay more than the 80% recoverable under the scheme.
· From October 1, the scheme will only cover 60% of salary, i.e. up to a maximum of £1,875. As above, employers will need to ensure employees receive at least 80% of their pay.
· On October 31, the scheme will end.
Clearly it is useful for employers to know how the scheme will be winding down. There will be no immediate cliff edge and another five months to prepare before the scheme closes altogether. The furlough scheme was introduced in March with the aim of saving jobs and avoiding mass job losses.
Hopefully, this clarity and the update will help many with future business planning and with getting people back to work. We expect that there will be a Treasury Direction published setting out the precise rules and detail in the next few weeks, along with further guidance for employers from HMRC.
From client feedback that we have received, the introduction of ‘flexi-furlough’ is particularly welcome in allowing employers to manage a safe and manageable return to work.