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Furlough leave: What do the changes mean for employers?

Laura Kearsley, partner in Nelsons’ expert employment law team, has explained what the changes, which were announced on Friday, 29 May by Chancellor Rishi Sunak, mean for employers.

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Furlough leave- The Coronavirus Job Retention Scheme (CJRS) – which was introduced as part of a package of measures to safeguard jobs and alleviate the impact of Covid-19 on businesses across the country – is set to change over the coming months.

Laura Kearsley, partner in Nelsons’ expert employment law team, has explained what the changes, which were announced on Friday, 29 May by Chancellor Rishi Sunak, mean for employers.

She said: “The scheme will continue in its current format – with employers being able to claim 80% of salary up to a maximum of £2,500 per month per employee, and employer National Insurance (NI) and pension contributions – until the end of July 2020. After that date, employees on furlough leave will continue to receive 80% of their salary but employers will be required to start contributing under the scheme.”

Furlough leave
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What changes have the government made to the CJRS?

“From 1 August 2020, the government will continue paying 80% of salary up to a monthly cap of £2,500. However, employers will have to pay employer’s NI contributions and pension contributions as they will no longer be able to reclaim those amounts under the CJRS.

“The following month, from 1 September 2020, the government will pay 70% of salary up to a monthly cap of £2,187.50, with employers being required to top the salary up to 80% up to a cap of £2,500. Again, employers will need to pay employer’s NI and pension contributions.

Furlough leave

“From 1 October 2020, the government will pay 60% of salary up to a monthly cap of £1,875. Employers will be required to top the salary up to 80% (again – to a cap of £,2500), while also paying employer’s NI and pension contributions.

“As before, employers can still opt to top up an employee’s salary over and above the 80% if they wish.”

Furlough leave
Laura Kearsley

When will the CJRS scheme close?

“The CJRS will close to new applicants on 30 June 2020. This means that employers considering furloughing more of their employees must do so by 10 June at the latest to ensure that those employees have spent the required minimum three consecutive weeks period on furlough by 30 June. The CJRS as a whole will end on 31 October 2020.”

What is flexible furloughing?

“The Chancellor also confirmed that a more flexible form of furlough will be introduced with effect from 1 July 2020. From that date, employers will be permitted to agree more flexible working arrangements with furloughed employees.

“For example, employers and employees can agree a return to work on a part-time basis with employees working any number of days/hours per week and shift patterns to suit the needs of the business.

 

“Employers will be required to pay employees in full for any time spent working and will be responsible for tax and NI contributions and those payments. Employers will not be able to reclaim under the CJRS for payments made in respect of time spent working but will still be able to reclaim under the CJRS for employees’ ‘normal’ hours that are not worked.

“When claiming under the CJRS, employers will have to report on hours worked and the usual hours an employee would be expected to work in a claim period. The minimum claim period will be a period of one week.

“In order to be eligible to reclaim under the CJRS for hours that are not worked, employers and employees will need to agree new flexible furloughing arrangements and any such agreement must be confirmed in writing.

“In light of the new flexibility to the CJRS rules, from 1 July 2020 claims will no longer be able to overlap calendar months. Further guidance regarding flexible furloughing is expected to be published on 12 June 2020.”

What should I do if I feel like I may need to make redundancies?

“Faced with uncertain trading times for many businesses and partial financial responsibility for all employees from 1st August, many employers will need to review their workforce and requirements to consider whether current levels of staffing are sustainable.

“If an employer intends to make more than 20 people redundant, this triggers collective consultation requirements, including minimum consultation periods during which redundancy dismissals cannot take effect. The consultation period for employers who anticipate making 100 or more people redundant is 45 days and for those anticipating making between 20 and 99 redundancies is 30 days.

“For employers who are concerned about the changes in the furlough scheme, they need to think carefully about whether they want to commence redundancy consultations now so that they are in a position to make redundancies before the government funding reduces – rather than waiting until that point to start consultation and being faced with employment costs during the consultation period.

“As well as complying with the requirements of collective consultation (which include liaising with recognised trade unions or elected employee representatives), employers that are making any number of employees with more than two years’ continuous service redundant will need to adhere to minimum requirements in terms of consultation and meetings – this could be challenging in the coronavirus lockdown.

“We cannot emphasise the importance of planning ahead wherever possible enough, particularly now employers have a much clearer idea of what the CJRS will look like going forward, when they will be required to start paying non-reclaimable monies to employees under the scheme and when it will end.”

For more information on how Nelsons can support your business, please visit www.nelsons.co.uk/managing-your-workforce. For the latest government advice on coronavirus, please visit www.gov.uk/guidance/coronavirus-covid-19-information-for-the-public.

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