Advice

How will the government’s extended furlough U-turn work in practice?

2 Nov 2020 By Francis Churchill

The move to continue this and pause the job support scheme has been welcomed, but some warn it is too last minute to help many and of huge confusion created    

As part of the government’s announcement of a second nationwide lockdown in England over the weekend, the chancellor has paused the launch of the job support scheme and instead extended the original furlough scheme for another month to support employers affected by new instructions for non-essential businesses to close for a month.

On the surface, the extension is simple. The scheme will now run until the beginning of December, offering the same level of support that was available in August. As such, the government will provide 80 per cent of furloughed workers’ wages up to a cap of £2,500 a month, with businesses only expected to pay national insurance and pension contributions.

There is also – similarly to the last few months – a flexible option available. Employers are allowed to claim furlough grants just for the time that employees are not working, and there are no minimum working hours required.

As with the original scheme, employers can apply for furlough grants ahead of time and be paid up-front in time for payroll.

To be eligible for the extended furlough scheme, employees needed to be on payroll by 30 October. Staff can be on any type of contract and, as with the initial scheme, any changes to working arrangements will need to be agreed with employees.

But the last minute nature of the extension announcement has – despite its seeming simplicity – created a confusing situation for employers to now get to grips with, says Simon Jones, director of Ariadne Associates. “While extending the furlough scheme is a good idea, it’s not helpful to make the decision on the day it was due to expire,” he says.

Jones also points out that different pages on the government’s official website contain contradictory information. Guidance dated 31 October says any employer can apply. But the latest guidance issued yesterday says the new system will only be available where employers had previously furloughed their employee before 30 June 2020 and submitted a claim before 31 July. “Small businesses that hadn’t previously used the scheme will be completely confused as to whether they can in fact claim,” says Jones.

The sudden change will also affect employers that had planned for the end of the furlough scheme, he says. “Many of the companies I work with have made redundancies, which they may not need to have done, and others had geared up to start the job support scheme, which has now been postponed,” Jones says. “Planning is an essential part of even the smallest business and that needs clear and timely guidance from the government.”

This was echoed by Ben Willmott, head of public policy at the CIPD, who says the extension of the furlough scheme, while welcome, would create a significant challenge for HR "given that most employers will have already made redundancy decisions and have been workforce planning on the assumption that it was to finish at the end of October".

“Employers in sectors most affected by the new lockdown restrictions such as hospitality, leisure and non-essential retail will have to look again at the best ways of reducing workforce costs as the new restrictions come into force, including putting people back on furlough where necessary," he says.

"Organisations will have to focus on ensuring there is clear ongoing communication with staff on the impact of the changes; for example, why people are being furloughed again and what will happen after the new lockdown restrictions in England end.”

Others agree that the sudden change in the scheme creates practical issues for employers needing to put staff on furlough. “Employers are supposed to agree any changes to employees’ contracts in advance – how are they supposed to do that at six hours’ notice at a weekend?” Heather Self, tax partner at Blick Rothenberg, told The Times.

Hartley Foster, head of tax disputes at Fieldfisher, also warns that the scheme could be subject to change down the line, and urges employers to monitor the rules and legislation to ensure they remain compliant. “When [the job retention scheme] was in operation before, the numerous amendments to it, and the guidance explaining its operation, all but inevitably increased the mistakes that were made,” he says.

“By spending time now on implementing an ongoing compliance process, employers can save themselves considerable hassle, expense and potential reputational damage in the long run."

This weekend’s announcement also added to tensions between the government in Westminster and the devolved governments that had been calling for an extension to the furlough scheme for weeks. The Welsh first minister, Mark Drakeford, told BBC Radio Cymru that UK chancellor Rishi Sunak had rejected his requests to increase subsidies for wages when Wales went back into a ‘firebreak’ lockdown last week. Wales is set to exit its lockdown on Monday 9 November, the weekend after England goes into its lockdown.

The government is expected to announce further details of the national lockdown in England and the extension of the furlough scheme later today.

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