Changes to the CJRS
The Chancellor has announced reforms to the Coronavirus Job Retention Scheme (CJRS). We are awaiting updates to the Treasury Direction (the formal rules which govern how HMRC is to operate the scheme) and the published guidance for employers for the finer detail - but these are the headline points that have been announced:
10 June 2020 will be the last day that employers can place employees on furlough.
From 1 July, 'flexible furlough' is being introduced, meaning employees will be able to work part-time and be furloughed part-time.
From 1 August, employers will have to pay employer's national insurance contributions (NICs) and pension contributions on furlough pay. Currently, the government meets the employer’s NICs and the equivalent of the minimum employer’s auto-enrolment pension contributions.
From 1 September, the government will only reimburse 70% of salary (up to a maximum of £2,190). Employers will be required to top-up to 80% (or more, depending on what the arrangement is with respective employees).
From 1 October, the government will only reimburse 60% of salary (up to a maximum of £1,875), and employers will continue having to top up to 80% (or more).
The furlough scheme will close on 31 October.
The Chancellor warned earlier in May that employers would be expected to bear some of the costs of furlough after the end of July, and this has already prompted many to implement, or at least start planning, the redundancy dismissals of employees for whom furlough has been only a reprieve.
On the other side of the coin, the introduction of the ability for employers to have employees working shorter hours and claim funding under the CJRS in relation to the balance of their hours is intended to help businesses re-start and build up their operations as lockdown measures are relaxed.
The big unknown is how the scheme will operate in this respect. The government has stated that further guidance, including as to how employers should calculate such claims, will be published on 12 June. We know that it will be for employers to determine the split between working and non-working hours, to be claimed for in minimum blocks of a week.
On the face of what has been announced, this arrangement will only apply to employees with normal working hours. But what about employees who do not have normal working hours? Will provision be made for them, perhaps with similar principles being applied as when determining furlough pay for such employees, with reference being made to average hours worked in the previous tax year and the hours worked in the corresponding month in 2019?
For the current formalities to be complied with when putting employees on furlough under the CJRS and my comments in the context of part-time furlough, see my blog on the latest Treasury Direction here.
To emphasise, however, consideration should always be given to the contract of employment before furloughing employees, and the same applies when newly introducing part-time furlough arrangements. Some contracts contain lay-off and short-time working provisions, which allow the employer to lay the employee off without pay, or to reduce their hours and reduce their pay proportionately. Just as these clauses allow employers to readily furlough employees completely on no more than 80% of their pay (subject to the cap under the CJRS), they will allow employers to dictate part-time furlough arrangements and to pay employees no more than the amount recoverable under the CJRS for such hours that are not worked.
For employers without the benefit of such contractual provisions, if they are not going to pay affected employees in full regardless of any reduction in working hours, to act lawfully, they will need to do one, or a combination, of two things: obtain the binding consent of employees, or impose the arrangement after applying appropriate procedures. What will constitute “appropriate procedures” will be a matter for legal advice according to the particular circumstances.
Where consent alone is to be relied upon (i.e. if contractual changes are not to be imposed on any dissenters), collective consultation will not be a consideration.
However, if that is not the case and 20 or more employees are to be affected at one establishment within a 90-day period, this will require a collective consultation process – and there will be a moratorium on effecting the required contractual changes of 45 days from the commencement of that consultation if 100 or more employees are affected, or 30 days if fewer than 100 are affected. (Employers who are also contemplating redundancy dismissals should bear in mind that any employees they propose to dismiss may part of the head-count for collective consultation thresholds, depending on the circumstances.)
Adding in time to plan and execute the process and then give contractual notice of changes, plus considerations about by when affected employees are expected to return to work full time or else be made redundant, means that in many cases an approach which involves collective consultation won’t be practicable. How to address such considerations, to include possible commercial solutions, is a matter for legal advice according to the particular circumstances.
The self-employed grant is being extended, with applications opening in August for a second and final grant. There will be parity with the reducing furlough scheme, paying 70% (not 80%) of average earnings up to £6,750.