What the second UK lockdown means for furlough – and jobs

John Hayes, Managing Partner, Constantine Law, considers how the latest lockdown, and the extension to the furlough scheme, will help employers retain jobs

The second national lockdown came as a disappointment for many, particularly those businesses forced to close: non-essential retail, leisure operators and restaurants.

It has led to the government needing to introduce further support measures to businesses and the Coronavirus Job Retention Scheme (CJRS), which was due to end on 31 October and be replaced by the Job Support Scheme has now been extended. Initially the extension was until at least 2 December 2020, when the lockdown is planned to finish, but last week the Government announced until 31 March 2021.

How does it work

An employer can now again claim for 80 per cent of wages up to a cap of £2,500 for the hours that have not been worked, the levels that were last applicable in August 2020. Employers must pay NIC and pension contributions for these hours.

In terms of calculating payments, employees who have previously been furloughed or who were on an RTI submission on or before 19 March 2020 will have their reference pay and hours based on the existing furlough calculations.

For new employers claiming or new employees hired on or after 20 March:

  • For those on fixed pay the last pay period prior to 30 October 2020 provides the basis for calculation.
  • For those on variable pay/hours the average of tax year 2020 to 2021 up to the start of the furlough provides the basis for calculation

Unsurprisingly the Job Retention Bonus, which had been due to be paid in February, has now been put on the back burner in line with the extension of furlough.

Which businesses are eligible? 

The scheme is applicable to all UK businesses and all PAYE employees (including part-time, agency, flexible and zero-hours contracts) who were on payroll as at 23:59 on 30 October.  Businesses must have made a real-time information submission notifying HMRC of a payment to those employees before 31 October.

In addition, employees on the payroll on 23 September 2020 who stopped working for their employer after that date can be re-employed and claimed for.

There is no need for the employee to have been furloughed previously or for employers to have previously used the CJRS in order to make use of it this time.

An employee must be furloughed for a minimum period of seven calendar days and have entered into a written agreement in respect of furlough leave, for a claim for wages to be valid. The scheme does not cover any new staff who started work after 30 October 2020.

What impact will this have on redundancies?

The extension of CJRS may well delay the making of more redundancies, which we were beginning to see. Although some critics have said the announcement has come too late for many workers, who have already been made redundant.

Whilst it  is possible to reinstate and furlough staff who were made redundant after 23 September 2020, many employers may wish to adopt a wait-and-see approach because we don’t know how long this new lockdown will last or the impact on the economy.

What about the flexible furlough scheme?

The flexible furlough scheme has also been extended. The scheme was introduced on 1 July to allow workers to move to a part-time working schedule as a way to bring people back from being fully furloughed.

What does the future look like?

There is obviously still huge uncertainty, including how long this lockdown will last, how extensively it will be lifted when it is, and how many regions might find themselves subjected to longer restrictions.

For now, the scheme has been extended until 31st March, which is beyond when the current lockdown in England is tentatively due to run to. The scheme will be formally reviewed in January.  It is good practice to inform employees that the scheme will be kept under review.

The CJRS was a good and innovative solution by the government in these extraordinary times, and its extension provides some relief as we experience lockdown. Many businesses will have to continue to pivot to new working arrangements in order to survive.

 

John Hayes is Managing Partner at Constantine Law

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