30 November 2020

How does the new furlough scheme work?

By Anissa Hallworth, Director, Hayes + Storr.

As most of you are aware, the Coronavirus Job Retention Scheme (the Furlough Scheme) was due to end on 31st October 2020 and be replaced by the Job Support Scheme.

The furlough scheme was initially extended until December 2020 to cover the period of the current lockdown. However, on 5th November 2020 the Chancellor announced that the furlough scheme will now be available until 31st March 2021. The amount of grant per furloughed employee may change after 31st January 2021 depending on the outcome of the government’s review in January.

The features of the extended scheme are:

1. From 1st November 2020 an employer can claim 80% of an employee’s usual salary for hours not worked up to a maximum of £2,500 per month.

2. Employers can claim for employees who are employed on 30th October 2020, as long as they have made a Real Time Information (RTI) submission to HMRC between 20th March 2020 and 30th October 2020 – notifying a payment of earnings to that employee.

3. The extended Scheme is flexible: employers can furlough employees for any amount of time and any work pattern, whilst still being able to claim for the hours not worked.

4. From 1st November 2020, the employer is required to pay an employee’s National Insurance Contributions and pension contributions.

5. As previously, whilst on furlough, an employee cannot provide services or undertake any activity which makes money for the employer.

There are several additional points to be aware of. These are:

1. New agreements to furlough employees or to vary furlough arrangements need to be made in writing. Agreements can be made retrospectively and be valid up to and including 13th November 2020.

2. With effect from 1st December 2020, furlough payments should not be made for any employee who is serving either a statutory or contractual notice period.

3. As previously, holiday entitlement will continue to accrue during furlough, but employees should not be put on furlough leave simply to cover holiday periods.

4. Employees who were employed as of 23rd September 2020 but were made redundant or stopped working thereafter, can be re-employed and furlough can be claimed for them if an RTI was submitted for them between 20th March 2020 and 23rd September 2020 notifying payment of earnings. There is some uncertainty as to how this will work in practice particularly in relation to matters such as continuity of employment and in respect of employees who have received redundancy payments.

Subject to the points made above, the extended scheme is similar in principle to the original scheme. Perhaps the most important change is that the scheme remains flexible in a way that the original scheme was not.

If you require further guidance on the new furlough scheme or help regarding any employment law matter, please contact Anissa Hallworth or Gerald Bloye on 01328 863231.