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Furlough scheme extended as England enters new lockdown

Written by
Lewis Silkin, widely recognised as the UK’s leading specialist employment law practice.
Authors
Lucy Lewis
Lucy Lewis
Partner - United Kingdom
Lewis Silkin
Carolyn Soakell
Lewis Silkin
Colin Leckey
Partner - United Kingdom
Lewis Silkin
United Kingdom
05.11.20
5
Boris Johnson has announced that the Coronavirus Job Retention Scheme will be extended rather than closed as originally planned. The extension will cover the new lockdown in England which is expected to come in on Thursday 5 November and last until Wednesday 2 December. This article sums up the immediate questions and implications for employers.

The Coronavirus Job Retention Scheme (or furlough scheme) was originally planned to end on 31 October. The new Job Support Scheme (JSS) was set to launch on 1 November. However, Boris Johnson has announced that the furlough scheme will be extended, having previously resisted calls for such an extension.   

To avoid having two schemes running simultaneously, JSS has been delayed. JSS will now launch when the new furlough extension ends.  

The extended furlough scheme will continue until December. The precise end date is unclear, but the English lockdown restrictions look set to be in place until 2 December. The government will pay up to 80% of an employee’s normal pay, capped at GBP 2,500 and employers will be responsible for National Insurance contributions (NICs) and pension contributions.  

The existing furlough scheme was in the final stages of being wound down. For the last three months the government contribution has been reducing whilst the employer contribution has been increasing. For October, the current maximum government contribution under the furlough scheme was 60% of normal pay (up to a cap of GBP 1,875) and the employer contribution was 20% (up to GBP 625). However, the extended furlough scheme will put the clock back to how things were in August, when the government contribution was 80% of wages up to a cap of GBP 2,500 and employers just paid employer NICs and pension contributions. 

Flexi-furlough will continue to be an option, so employees can work part-time and receive a furlough grant for unworked hours.  

The JSS was divided into two parts: JSS Open (for businesses operating but where employees are working at least 20% of their usual hours) and JSS Closed (where the business is legally required to close its premises and employees have no work to do at all). Under the JSS Closed, the government would have paid 67% of employee wages, up to a maximum of GBP 2,083.33 a month. Under JSS Open, the position was more complicated but the government contribution was capped at a maximum of GBP 1,541.75 per month and the employer contribution was capped at GBP 125 per month. This means that the extended furlough scheme is more generous than both JSS Open and JSS Closed.  

The government has widened the furlough scheme so that, to be eligible to be claimed for under this extension, employees must simply have been on an employer’s PAYE payroll before midnight on 30 October 2020. This means a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made on or before 30 October 2020. This will come as particularly welcome news for those employees who have never qualified for furlough but who would have been eligible for JSS, including recent starters and employees who carried on working throughout the pandemic and never stopped work for three consecutive weeks before 1 July (a pre-condition of eligibility for the furlough scheme after July).  

It is currently unclear if employers can re-hire employees to put them onto the extended furlough scheme. This is of critical importance since many furloughed employees were made redundant at the end of October on the assumption that the furlough scheme was ending on that date. The last-minute extension came too late for most employers to retract notices, but the key question is whether employees can now be re-hired in order to be furloughed for an extra month. The original furlough scheme allowed employers to re-hire employees who were made redundant before it was launched, so it’s possible that the extension will work in a similar way. 

If re-hiring is allowed, it is unclear if it will only benefit employees whose redundancy took effect on 31 October or if it might also benefit those whose redundancy took effect sooner. The announcement states that employees must have been employed at 11.59pm on 30 October to qualify for the furlough extension. Possibly those who were made redundant on 31 October could be re-hired, but not those whose redundancy took effect sooner, or possibly the government will widen the eligibility criteria to cover those who were made redundant earlier. 

Even if re-hiring is allowed, however, employers will not be under any obligation to re-hire and should take legal advice before doing so. 

It is also unclear how the furlough extension will interact with the Job Retention bonus. Under the current rules of the Job Retention bonus scheme, the employee needs to be retained in employment and paid a minimum amount for November, December and January. It’s unclear if furlough pay will count towards the minimum (the government has confirmed that JSS pay counts so in principle it seems likely that furlough pay should also count) or if the government will now amend the bonus scheme. 

Many businesses have already put in place JSS Open Agreements in anticipation of the scheme’s launch on Sunday 1 November. Those businesses should contact affected employees as soon as possible to explain that the government has made a last-minute decision to extend the furlough scheme and to ask them to agree to continue on furlough instead.  Some wording which you may wish to use is provided below. 

Possible wording for urgent communication to employees: 

You may have seen that the government has made a lastminute decision to extend the furlough scheme.  The government has said that the extended furlough scheme will remain open until December.  As a result of this extension, the start of the Job Support Scheme (JSS) will be delayed so that it starts after the end of the extended furlough scheme. 

[For an employer where there is already a JSS agreement in place] Although we are grateful to you for agreeing to enter into the JSS scheme, we now need to ask that you agree to be furloughed until December instead. This has the advantage of ensuring that you receive a higher percentage of capped pay than was available under the JSS scheme. I should be grateful if you could reply to this email confirming your agreement to remain on furlough until December on the existing furlough pay [and hours]. 

[For an employer where no JSS agreement is in place and employee already on furlough]: As you are already on furlough/flexi-furlough, we propose to continue the existing furlough arrangements until December. I should be grateful if you could reply to this email confirming your agreement to remain on furlough until December on the existing furlough pay [and hours]. 

[For an employer where no JSS agreement is in place and employee not on furlough]: Given the impact that the lockdown is likely to have on our business, we would like to ask that you to agree to be furloughed/flexi-furloughed until December. I have attached a letter setting out the arrangements we would ask you to agree.  This reflects the arrangements we have in place with other furloughed employees.