Furlough scheme changes include 10 June cut-off date for staff who have not yet been furloughed
Government outlines changes to the Job Retention Scheme to take place between July and October 2020.
The Chancellor of the Exchequer, Rishi Sunak, gave a speech on 29 May outlining changes that the government will make to the Coronavirus Job Retention Scheme ('CJRS'). These changes will have an impact on employers' plans for using CJRS moving forward.
An important element for employers is that a new cut-off date of 10 June will be applied for staff who have not yet been furloughed as CJRS is adapted to increase its flexibility. More detail on this, and other key changes coming into effect, is set out below.
The speech set out the context in which the Government was making changes to CJRS. In particular, hopes that businesses will soon be able to re-open were highlighted, provided that those workplaces are 'Covid secure' to protect staff and customers.
The Chancellor was keen to highlight that CJRS could not continue indefinitely and would only remain in place until the end of October 2020. Before it ends the government will ask employers to contribute to the costs of keeping staff on furlough, and the government intends to introduce flexibility to CJRS.
Moving forward, employers will be asked to pay increasing contributions to the costs of keeping employees on CJRS. The government's reasoning is that by September employers will have had the opportunity to make any necessary changes to their workplaces and business practices to allow them to return to more normal operations and to reintroduce staff to work. The increases will occur on an incremental scale:
- From August, HMRC will continue to contribute 80% of furloughed staff wages, but employers will be asked to recommence payments for employer National Insurance and employer pension contributions. These costs are currently covered by CJRS and are calculated by HMRC to be, on average, 5% of total employment costs.
- From September, HMRC will reduce its contribution to 70% of furloughed staff wages, with employers contributing 10%, in addition to NI and pension payments.
- From October, HMRC contribution will reduce to 60% and employers' contributions will rise to 20%.
- The JRS will then close at the end of October.
In addition to the above measures HMRC are restructuring CJRS to make it more flexible. From 1 July employers will be able to return staff to work on a part-time basis whilst they remain on furlough. Employers will have to pay staff for the time they work as normal, while CJRS continues to cover staff costs for the days they are not at work, subject to the change in contribution levels outlined above.
In order to introduce the new flexible scheme, HMRC will close the CJRS to new entrants on 30 June. Employers wanting to place staff onto CJRS, where they have not previously been furloughed, will need to do so by 10 June to allow them to complete the minimum (3 week) furlough period before 30 June.
Further detail is awaited on how this will work in practice, including an apportionment of the cap between HMRC's contribution and that of the employer (i.e. balancing any furlough payment against actual working time).
The Chancellor stated that there will be no further extensions to CJRS.
The incremental reduction in support from HMRC and the increasing requirements on employers appear to have been set arbitrarily by date rather than by any other metric. This approach appears to be based on some wide assumptions about what employers will have been able to do to get ready to re-open their businesses and / or return their staff to work. For this reason employers should continue to carefully plan ahead and consider what impact, if any, the changes above will have on their operations and staff.
If you would like to discuss any aspect of this article further, please contact Michael Crowther or any other member of the employment team on 0113 244 6100.
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The information in this article is necessarily of a general nature. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.