Legal

The extended furlough scheme – explained

17 Nov 2020 By Tracey Marsden and Melanie Lane

Tracey Marsden and Melanie Lane examine the details of the government’s latest decision to run the job retention scheme until next year

The chancellor has announced that the furlough scheme will be extended until 31 March 2021. The accompanying policy paper states that this is an extension of the previous furlough scheme and the same rules will apply “unless we say otherwise”. It also states that HMRC will publish details of employers that make claims under the extended furlough scheme, starting from December – no doubt in an attempt to flush out any fraudulent claims.

Employees on the payroll on 30 October

The policy paper confirms that, to be eligible, employees must have been on their employer’s PAYE payroll on 30 October and a real time information (RTI) submission must have been made to HMRC for the employee between 20 March and 30 October 2020. This means that some recent joiners may not be covered.

Redundancies and rehiring

One of the main questions raised by businesses has been whether employees recently made redundant can be rehired for the purposes of accessing the extended furlough scheme. The policy paper confirms that any employees who were employed and on the payroll on 23 September 2020 but who were made redundant can be ‘re-employed’ and claimed for under the extended furlough scheme, provided that the employer had made an RTI submission to HMRC between 20 March 2020 and  23 September 2020 notifying a payment of earnings for those employees.

Reference pay

For those previously eligible under the original furlough scheme

The policy paper states that in respect of any eligible employees who “were previously furloughed”, employers must use “the same calculations for calculating reference pay and usual hours” as the original furlough scheme. However, the paper also later says this calculation should be used for employees who were “previously eligible… even if a claim was not made in respect of that employee” in respect of the period up to 31 October.

While this is confusing, what is clear is that:

  • for regular employees on a salary who have previously been furloughed, the grant will cover 80 per cent of their salary in their last pay period before 19 March 2020 (or 28 February 2020 if this was the date the employer previously used); and
  • for employees whose pay varies who have previously been furloughed, the grant will cover 80 per cent of the higher of (i) the wages earned in the corresponding calendar period in the tax year 2019-20; and (ii) the average wages payable in the tax year 2019-20. 
  • For those who were ‘not eligible’ under the original scheme 

The policy paper explains that there will be alternative calculations to determine their reference pay and usual hours for employees who were not eligible under the original furlough scheme and for “new employers claiming and new employees hired between 20 March 2020 and 30 October 2020”.

In relation to reference pay:

  • for employees on a fixed salary, the grant will cover 80 per cent of the wages payable in the last pay period ending on or before 30 October 2020; and
  • for employees whose pay varies, the grant will cover 80 per cent of the average wage payable between (i) the later of the date their employment commenced and 6 April 2020; and (ii) the day before their period of furlough leave under the extended furlough scheme begins.

In relation to usual hours of work:

  • for employees on fixed hours, whose pay does not vary according to the number of hours they work, usual hours will be the contracted hours worked in the last pay period ending on or before 30 October 2020; and
  • for employees whose hours of work vary, usual hours will be the average hours worked between 6 April 2020 and the day before their period of furlough leave under the extended furlough scheme begins.

It seems that those previously eligible for support under the original furlough scheme will not get the benefit of any recent pay increases. 

Agreement with employees

The policy paper explains that, as with the original furlough scheme, employers will need to discuss any new working arrangements with their staff and make any necessary changes to their employment contract by agreement. The requirement for the employer to confirm to employees in writing that they have been furloughed remains. 

Tracey Marsden and Melanie Lane are employment partners at CMS

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