The Coronavirus Job Retention Scheme (CJRS) has been extended until 31 October 2020.
We asked our legal experts your frequently asked questions about how the furlough scheme will change as it winds down, what you must do as an employer, and the alternatives to redundancies.
When does the furlough scheme end?
The furlough scheme will end on 31 October 2020. Here’s how the scheme will work in the final months:
- The Government will pay 70 per cent of wages up to a cap of £2,190
- Employers will pay 10 per cent of wages to make up 80 per cent total up to a cap of £2,500
- Employers will pay ER NICs and pension contributions
- For the average claim, this represents 14 per cent of the gross employment costs the employer would have incurred had the employee not been furloughed
- The Government will pay 60 per cent of wages up to a cap of £1,875
- Employers will pay 20 per cent of wages to make up 80 per cent total up to a cap of £2,500
- Employers will pay ER NICs and pension contributions
- For the average claim, this represents 23 per cent of the gross employment costs the employer would have incurred had the employee not been furloughed
What is the Job Retention Bonus?
To encourage retention, a £1,000 Job Retention Bonus is available to employers for each furloughed employee that is kept on until January 2021. This is provided they are paid an average of £520 per month between November 2020 and January 2021.
You will be able to claim the Job Retention Bonus after you have filed PAYE for January. Payments will be made to employers from February 2021.
Can my employees still be on flexible furlough?
Yes. Since 1 July 2020, furloughed employees have been able to return to the workplace on a part-time basis. In September and October, you’ll still be able to place staff on flexible furlough, provided they’re eligible.
Flexible furlough agreements can last any amount of time, however the minimum period that employers can claim for must be a minimum of 7 calendar days. Find out how to calculate claims for an employee who is flexibly furloughed.
You will only be able to claim via the CJRS for employees’ wages for the periods where they haven’t worked.
You will need to submit the following details to HMRC:
- The usual hours an employee would be expected to work, based on the number of hours the employee was contracted for at the end of the last pay period ending on or before 19 March 2020
- The actual hours worked, or which will be worked
Find out how to report employees’ wages to HMRC using the PAYE Real Time Information system when you’ve claimed wages through the CJRS.
It’s important to remember the following:
- When claiming for unworked hours, employers will need to report and claim for a minimum period of 7 calendar days, unless a claim is being made for the first or last few days in a month.
- Claim periods must not overlap months.
- The number of employees you can claim for in any claim period must not exceed the maximum number of employees you have previously claimed for through the CJRS.
If you’re unsure, FSB members can refer to the flexible furlough factsheet on the FSB Legal Hub for more information.
Do I need to change employees’ contracts?
If you’re bringing back furloughed employees on reduced hours, you must agree the new working patterns as a temporary variation of the contract, if the existing contract does not allow you to do so.
Agreements regarding work during furlough must be confirmed in writing under the terms of the CJRS rules.
You can read our guide to employment contracts to learn more.
What if I can’t afford the increased employer contributions?
Furloughed employees are entitled to receive 80 per cent of their wages, up to a cap of £2,500, until the scheme ends on 31 October 2020. Contributions from the employer are mandatory.
You may need to remove employees from the furlough scheme and consider alternatives, such as short-term working or redundancies.
Can I make an employee redundant whilst on furlough?
Yes. Our guide to the redundancy process during COVID-19 outlines everything you need to consider when making employees redundant, to ensure this is done in a compassionate and legal way.
Remember, redundancy pay must be calculated based on standard wages, not furloughed wages.
What are the alternatives to redundancy?
Redundancies are a difficult decision for any small business owner to make. Although redundancies will reduce your immediate employment costs, there are other factors to be aware of, such as:
- Redundancy payments
- Time spent following processes
- Potential risk of unfair dismissal
- Loss of skills
- Costs of recruitment in the future
There are a number of redundancy alternatives you may wish to consider:
- Redeployment: Moving an employee to other areas of the business where there is more demand, either temporarily or permanently.
- Lay-offs: If it’s not viable to keep an employee on the furlough scheme due to increasing contributions, or they aren’t eligible, you may want to discuss the option of unpaid leave.
- Short-time working or reduced hours: If there is a temporary downturn of work, you might want to place employees on reduced hours outside of the furlough scheme and only pay for the hours they work.
- Short-term or long-term pay reductions: Temporary or permanent pay cuts may be agreed by staff to avoid redundancies in certain circumstances. It’s important to ensure that this pay is not below the National Minimum Wage.
In all cases, you must have the employee’s written consent unless their existing employment contract allows you to make these changes.
If the period of short-time working or lay-off is over four weeks, or more than six weeks in a 12-week period, employees have a statutory right to treat themselves as dismissed by reason of redundancy and are entitled to a redundancy pay (unless the employer serves a counter notice stating otherwise where certain conditions are met.)
More questions about employment?
With FSB Employment Protection, you have access to all the HR help you need to run your business, including contract templates, detailed guides and a 24/7 legal advice line.
FSB members have access to a detailed factsheet regarding the furlough scheme and all upcoming changes on the FSB Legal Hub.