Furlough Scheme extended until March 2021
Although described as an extension to the furlough scheme, in practice this amounts to starting the furlough scheme again from scratch, because it reverses some of the changes which were made to the furlough scheme when it was tapered in September and October 2020. In particular:
- Employer contributions to salary payments, as required by the furlough scheme in September and October 2020, have been removed. However, employers will still have to cover employer National Insurance and pension contributions, and the Government will review the scheme in January 2021 to decide whether employer salary contributions will be reintroduced.
- The government contribution will remain at the original level of 80%, capped at £2,500 per month, rather than the lower contributions proposed for the Job Support Scheme. Because of the extension of the furlough scheme, the Job Support Scheme has been put on hold.
- Employers can claim even if they have not used the furlough scheme before and can furlough employees even if they have not furloughed them before.
- The cut-off date for eligibility is that an HMRC payroll submission must have been made in relation to the employee by 30 October 2020. This means that, for the first time, employers can furlough employees who started between 20 March and 30 October 2020.
- Just as when the furlough scheme began, employees who have recently been made redundant or have otherwise stopped working, can be re-employed and furloughed instead. The cut-off date is that those employees must have left employment since 23 September 2020.
The Government will provide full guidance to the new scheme on 10 November 2020, but it has already provided some further information about how the scheme will operate in practice.
- The option to furlough employees flexibly, so that they work part-time and receive furlough payments for the days when they do not work, has been retained.
- For most employees, the reference pay and usual hours will be calculated in the same way as they were under the original furlough scheme. Therefore, even if employees have agreed to a pay cut or reduced hours since March 2020 because of Covid-19, it will still be possible to claim under the furlough scheme based on their original pay rate and hours.
- For new employees, the reference pay and usual hours will be based on the last pay period before 30 October 2020 or, if they have variable hours, their average for the period between 6 April 2020 (or when they started their employment, if later) and 30 October 2020.
- Claims can be made from 8am on Wednesday 11 November 2020. Any claims for a particular month must be made by the 14th day of the following month, a tighter deadline than before.
- Because of the extension of the furlough scheme, the Job Retention Bonus, which was to be paid to employers who do not make redundancies, has been put on hold for now.
Actions to take now
- As before, employers must keep written records confirming that employees have agreed to be furloughed, so written agreements should be put in place as soon as possible. It is advisable to make them subject to any new government guidance which is issued after they were made.
- Employers can backdate furlough agreements to 1 November 2020 so long as they are made before 13 November 2020, which is a further reason to take steps to prepare straightaway.