Details of the amendments to the current Job Retention Scheme (JRS) were published on 12 June 2020. The rules are effective from 1 July and reflect the desire, and indeed need, for employers to start to re-engage their employees and get back to business. There are two over-riding two key points.
Firstly, the rules provide an opportunity for employees to return to work on a part-time basis whilst allowing the employer to claim for the cost of the employee’s wages for the non-working time the employee remains furloughed. This is a change from the current scheme under which employees are not allowed to work at all. It is intended to provide the necessary flexibility for employers wishing to open their doors without the requirement to bring all employees back at once, something which for many businesses will not be feasible.
The second key point is that from the 1 August the amount an employer is able to claim via furlough under the JRS is progressively reduced:
- From 1 August the employer will not be able to claim via furlough the cost of employer national insurance and pension contributions.
- From 1 September the employer claim will reduce to 70% with employer contributing 10% of the furloughed employee’s wages.
- This employer contribution will increase from 10% to 20% and therefore the claim amount will reduce to 60% from 1 October through to closure of the scheme on 31 October.
- The employee will still receive 80% of salary through to 31 October and it is therefore a reduction in the relief available to the employer.
Whilst these are the headline points there is a significant amount of supporting detail and a number of points to consider:
- With some very limited exceptions, being able to benefit from the new arrangements is conditional on the employee having been in the current JRS running through to 30 June.
- 30 June must be viewed as the end date for the existing scheme. This means that where an employee’s furlough claim period starts in June and ends in July the employer is not able to submit a single claim but must instead submit two; one for the period to 30 June and one for the July period through to the end date.
- It further follows that for such an employee flexible part-time furloughing cannot be considered until the full-time three-week furlough period has finished.
- There is a deadline for making claims under the current scheme of 31 July. The start date for claims under the new scheme is 1 July.
- From 1 July employees can return to work with the employer making a furlough claim for hours not worked.
- To qualify under the new scheme the employee must have been furloughed for a three-week period between 1 March and 30 June 2020. This only needs to have been for a single three-week period but it is now too late to furlough an employee for the first time as we are now within three weeks of 30 June, the end date of the JRS in its current format.
- The number of employees an employer may claim for will be limited to the highest number it claimed for in a single claim period. Thus, where an employer made furlough claims for 30, 40 and 50 employees in three consecutive months, the maximum number of employees for whom a claim may be made post 30 June is 50, regardless of whether more (different) employees were actually furloughed. It does not however need to be the same 50 employees that are furloughed under the new scheme so the upper limit should be viewed as a cap on the overall number.
- For employees returning from parental, adoption, paternity or parental bereavement leave the retuning employee may be furloughed if the return is after 10 June and he or she has not previously been furloughed. The only requirement is that the employer has made a furlough claim for an employee in the period 1 March to 30 June.
- The progressive reduction in the amount the employer may claim means that each month must be looked at in isolation for claims purposes. This means that it is will not be permitted to submit a claim which stretches across a month end. The requirement is therefore that a claim, which must be for a minimum of seven consecutive days , must start and end in the same month.
- An employee may work and be furloughed in the same pay period. This flexibility will allow, for example, an employee to work five mornings a week and be furloughed for each afternoon. This is because the furlough claim is calculated based on hours worked and not worked.
- The new scheme will continue to limit furlough claims by reference to a limit set at £2,500. This will need to be pro-rated where the employee is part furloughed and part working.
Whilst the over-riding intention of the new arrangements is to ease employees back into work and reduce the cost burden on government, the mechanism for doing this is quite complex with a significant number of factors to be taken into account. The progressive reduction in amounts employers may claim has led to the design of the new scheme making reference to the old but then being distinct to cater for the month on month changes as we move towards closure. It is perhaps relevant that HMRC have recognised that the claims process is relatively complex and have put in place mechanisms to deal with under and over claims.
If you have any questions or would like to discuss the impact of Coronavirus on your business, please get in touch.
The information in this update should not be regarded as financial advice. This is based on our understanding on 17 June 2020. Laws and tax rules may change in the future.