Coronavirus Job Retention Scheme Update

Coronavirus Job Retention Scheme Update

Key Contact: Claire Knowles

Author: Mark Alaszewski 

The Coronavirus Job Retention Scheme (‘CJRS’) is entering its final phases and thanks to Chancellor Rishi Sunak’s announcement on Friday we now have a better idea of what the scheme will look like until its withdrawal on 31st October 2020.

10 June 2020 – ‘Cut-Off’ Date for Furlough of New Employees

The first major change to the scheme is that the scheme will be closed to new entrants on 30 June 2020. This means that there is now a “cut-off date” of 10June 2020 for new employees to be put on Furlough leave, and any employee furloughed for the first time after 11 June 2020 will not be able to benefit from the scheme. This does not mean that the employee has to remain on Furlough leave continuously until the scheme ends and it will still be possible for employees to go in and out of the scheme providing they have been on Furlough leave for a previous period (before 30 June).

This measure is the first major attempt to place restrictions upon CJRS to begin to wind down its use. However it risks being counter-productive, at least in the short-term, as the effect of the restriction may be to encourage employers to make use of Furlough leave as a precautionary measure in circumstances where they might not otherwise have done so. This is particularly so as this is necessary to access what employers may view as beneficial part-time working arrangements from the start of July.

1 July 2020 – Part-Time Working Option

On 1July 2020 employers will have the option of taking employees back on a part-time basis whilst remaining on Furlough leave for the balance of their normal hours. This change is coming in a month earlier than expected. This will entail a split between the wages payable when the employee is at work (which will be fully met by the employer) and the wages payable when the employee is on Furlough leave (which will continue to be met up to 80% of salary under the established CJRS rules).

Some of the detail around how the new phase of the scheme will work in practice remains unclear. Government guidance provides that employers should report details of the new working arrangements to HMRC at the outset. However as with the current scheme it is unclear how this will be monitored and it may be that HMRC continues to apply a ‘light touch’ to monitoring arrangements within the workplace.

Guidance also suggests that the scheme will pay for ‘normal hours not worked’ but it is unclear how these will be calculated, particularly for employees who do not have regular working hours. It is also unclear how part-time working will interact with contractual issues such as sickness and annual leave. We would suggest that in principle HMRC may not be happy with a situation in which employees are required to take their annual leave exclusively on Furlough leave dates.

Further guidance is due on 12 June 2020 which may provide some much-needed clarity around some of these issues.

1st August 2020 onwards – ‘Tapering’ Employer Contributions  

From 1August 2020 CJRS will cease to be cost neutral to employers who will be required to make a contribution towards salary costs which will be progressively increased until the end of October 2020. 

Initially the government will continue to pay up to 80% of salary costs for staff on Furlough leave but will stop funding employer’s NIC and pension contributions which the employer will be required to pay. On 1 September 2020 the government contribution will reduce to up to 70% of salary costs with the employer required to contribute 10%.  On 1October 2020 the government contribute will further reduce to up to 60% of salary costs with the employer required to contribute 20% before the scheme is fully withdrawn on 31October 2020.

The idea behind this is clearly to disincentivise longer-term reliance upon CJRS and given the astronomical cost of the scheme it is, of course, inevitable that it would have to end at some stage. What is perhaps surprising is that the government has not adopted a sectoral approach as, whilst life may be returning to something approaching a new normal in some parts of the economy, it is unlikely to do so for other sectors even within these extended timescales. It is difficult to avoid the conclusion that the 31st July 2020 when the CJRS ceases to be ‘cost neutral’ for employers may also herald the onset of more large-scale redundancies within the UK economy.

For advice on this and range of other employment law issues please do not hesitate to contact the Acuity employment team.

Claire Knowles – Partner

Mark Alaszewski – Associate

Rebecca Mahon – Solicitor

Adam McGlynn – Trainee Solicitor

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