Navigating the new normal

Update on Job Retention Bonus and flexible furlough

All content on this page is correct as of July 10, 2020

From 1 July 2020, employers have been allowed to bring furloughed employees back to work part-time, while still being able to claim the CJRS grant for the hours not worked (flexible furlough). The CJRS will close permanently on 31 October 2020.

In outline

The flexible furlough scheme is only available for employees previously furloughed for at least three consecutive weeks between 1 March 2020 and 30 June 2020. The last date for furloughing employees for the first time was 10 June. However, those returning from family-related leave do not need to have been previously furloughed before the 10 June cut-off date provided their employer has previously furloughed employees.

Furloughed employees will continue to receive 80% of their wages for normal hours not worked, subject to a monthly cap of £2,500, but the government’s contribution to furlough pay will gradually taper, as follows:

  • from 1 August 2020, the government will pay 80% of wages up to £2,500 a month. Employers must pay employer National Insurance contributions (NICs) and employer pension contributions;
  • from 1 September 2020, the government will pay 70% of wages up to £2,187.50 a month. To make up the 80% total (subject to the £2,500 cap), employers must pay 10% of wages plus employer NICs and employer pension contributions; and
  • from 1 October 2020, the government will pay 60% of wages up to £1,875 a month. To make up the 80% total (subject to the £2,500 cap), employers must pay 20% of wages plus employer NICs and employer pension contributions.

New and updated guidance

More details of the flexible furlough scheme are set out in new and updated guidance notes:

There is also an illustrative calculation, Example of how to calculate the amount you should claim for an employee who is flexibly furloughed, based on flexible furlough taking place in July before tapering starts, and new flexible furlough examples in Guidance: Find examples to help you work out 80% of your employees’ wages, national insurance contributions and pension contributions.

Existing guidance notes have also been updated to reflect the changes. (see Collection: Coronavirus Job Retention Scheme for links to the notes).

New Treasury Direction

On the 25 June 2020, the third and most recent Treasury Direction was published. It provides instructions to HMRC on operating the CJRS and it contains new wording on the purpose of the CJRS, stating that amounts paid under the scheme must be used to “continue the employment of employees in respect of whom the CJRS claim is made”

There has been some media coverage about what this might mean in respect of the intended use of the CJRS during redundancy exercises and whether (or not) funds may be used for any employees working out their notice periods whilst on furlough.

Such a change would be significant, but we do not consider that to be the intention. In this regard:

  • the first and second Treasury Directions had indicated that all that was required to access the CJRS was for the employer to have been affected by the COVID-19 pandemic;
  • the employee’s CJRS guidance expressly states that an employer can continue to make someone redundant while they are on furlough or afterwards;
  • employment continues while an employee is on notice and that is not inconsistent with the amended wording.

What does appear clear though (and this is not new) is that claims for pay in lieu of notice and for statutory redundancy payments cannot be made under the CJRS.

Job Retention Bonus

On the 8 July 2020, the government announced the implementation of a new Job Retention Bonus (JRB) which would see a £1,000 bonus paid to employers who kept on their furloughed employees beyond the end of the furlough scheme in October.

 Employers will need to consider the following key points if they wish to benefit from the JRB:

  • furloughed employees will need to be continuously employed through to the end of January 2021.
  • the government will provide a one-off £1,000 reward for every furloughed employee. Payments are due to be made from February 2021.
  • the employees must have earned at least the lower earnings limit of £520 per month between November and the end of January 2021.

It will be interesting to see if this will be enough to encourage employers to keep furloughed staff in continuous employment. But for now, we expect to receive further details from the government about the JRB by the end of July.

 Additional information regarding the JRB announcement is available here.

Get in touch with our employment department if you need any further advice.

This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of July 10, 2020.

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