On 10 November 2020, the Government published newly updated guidance explaining the rules relating to the extended furlough scheme which will last until the end of March next year.
Employers will be familiar with most of the furlough scheme rules as they have remained unchanged.
However, there are some important exceptions which employers will need to take into account when deciding whether to use the scheme.
Here we answer some of the most frequent questions relating to furloughing employees under the extended scheme.
Your questions relating to the extended furlough scheme answered
- How much of the wage do we pay for an employee who is furloughed?
Unlike the furlough scheme rules in September and October, there is no requirement that you contribute to the employee’s wages during the furlough period. You can claim 80% of your employee’s salary, up to £2,500 per month. Provided you have the employee’s agreement to be furloughed on 80% of their pay and subject to the cap, you will only need to pay national insurance and pension contributions where required.
However, whilst the furlough scheme has been extended until 31 March the contribution rates will be reviewed in January 2021. It may then be decided that economic circumstances have improved sufficiently to ask employers to contribute towards the 80% of pay. That could mean you will need to pay 10 or even 20% of the employee’s pay whilst they are furloughed with the Government contribution reducing by a corresponding amount.
- Are there any other costs that we need to take into account?
During furlough, you will need to consider the costs of other contractual benefits. These will continue unless you agree with the employee that they will temporarily cease. You will not be able to avoid the entitlement to paid annual leave continuing to accrue. You can only limit its accrual to the amount guaranteed under the Working Time Regulations 1998 which is at the rate of 5.6 weeks per year. That amounts to approximately 12.07% of a worker’s normal pay
Holidays may be taken during the furlough period, but you will need to pay the difference and top up to 100% of normal pay.
- Can we still claim the Job Retention Bonus in February?
No, that bonus, due to be paid out for employees retained after furlough until the end of January, has been scrapped due to the continuation of furlough.
It is likely another incentive scheme will be introduced following the end of the extended furlough period.
- Which employees can we place on furlough?
The previous restrictions are removed under the extended furlough scheme so that any employee who was on your payroll on 30 October 2020 can be placed on furlough. You just need to have made a Real-Time Information (RTI) submission notifying payment for that employee to HMRC at some point between 20 March 2020 and 30 October 2020.
- What’s happened to the Job Support Scheme?
That has been postponed. It had been intended that it would replace the furlough scheme and it might yet do so when the extended period of furlough ends as at 31 March 2021.
If you had already put in place Job Support Scheme agreements, you should now ask employees to agree to the furlough arrangements instead. As the furlough scheme is generally more generous getting agreement should not be difficult.
- Can we furlough with effect from 1 November 2020 even if we were not able to get an agreement in place before this?
Yes, unlike the Job Support Scheme you can backdate your furlough agreement to 1 November 2020. However, in the latest guidance, it has been announced that a retrospective agreement has to be put in place by the end of Friday 13 November 2020 which doesn’t give much time.
Any backdated agreement will be dependent on the employee genuinely having been furloughed during this time. If the employee has actually been working all of their usual hours, furlough cannot be backdated.
- Is flexi-furlough still possible?
Yes. The extended furlough scheme allows for you to furlough an employee for just some of their hours of work. You will need to pay the employee as normal for the hours they work. The contribution cap that applies to the furloughed hours will be proportionately reduced too.
- Can employees be re-employed to be put onto furlough?
Employees who were on the payroll on 23 September 2020 who have since been made redundant or stopped working for any other reason can be re-employed and put onto the furlough scheme. Again, the PAYE RTI submission must have been made for that employee on or before 23 September 2020. Employees on fixed-term contracts that have expired since 23 September can also be re-employed and claimed for.
However, there is no obligation for you to rehire and you will need to take into account the costs that will be incurred during the furlough which cannot be claimed from the Government. You should also consider how the employee will exit the business following the furlough.
- Can we place the employee on notice during furlough?
It has been possible for employers to continue to claim furlough whilst the employee is on notice. However, in the latest guidance published on 10 November 2020 it states that the Government is “reviewing whether employers should be eligible to claim for employees serving contractual or statutory notice periods and will change the approach for claim periods starting on or after 1 December 2020, with further guidance published in late November.”
This suggests that from 1 December 2020 it may not be possible to claim for wages during any period of notice. That will have a big impact on costs and should be taken into account in deciding whether the scheme should be used particularly where an employee is requesting to be rehired.
- How do we calculate the wages to claim?
The reference period that you will use to work out your employee’s usual wages may be different under the extended scheme.
For employees with fixed pay, the reference period will remain the last pay period ending on or before 19 March 2020 if they were on your payroll on 19 March 2020, and you had made a payroll submission for them before that date. The same reference period will also apply to those employees you have previously furloughed prior to 31 October 2020.
However, for employees not employed as at 19 March and who have not previously been furloughed the pay reference period will be the last pay period ending on or before 30 October 2020.
For employees without fixed pay, the same principles apply in that if they were employed or previously furloughed the ‘old’ rules apply in that their wages will be calculated by reference to what they earned in the corresponding calendar period in the tax year 2019 to 2020 or the average wages payable in the tax year 2019 to 2020. Taking the higher value.
For other employees’ you should calculate 80% of the average wages payable between 6 April 2020 or, if later, the date the employment started, and the day before they are furloughed on or after 1 November 2020.
- Is the process for making a furlough claim the same?
Although the process is the same, there is a shorter claim window. Claims relating to November 2020 will have to be made by 14 December 2020. Claims relating to each subsequent month should be submitted by day 14 of the following month. For employers with a significant number of employees on furlough, this means they will need to plan ahead and be organised in order to avoid paying employees but missing the deadline to reclaim the government contribution.
It should also be noted that from December 2020, HMRC will publish employer names for companies and Limited Liability Partnerships, the company registration number of those who have made claims under the scheme.
- What happens for employees who are sick, shielding or carers?
It is possible to furlough employees who are clinically extremely vulnerable and are shielding in line with public health guidance or those who need to stay at home with them. However, there is no obligation to do so. An employee who is within the definition of being clinically extremely vulnerable will qualify for statutory sick pay if you do not furlough them.
Entitlement to sick pay should not be a factor when deciding whether to furlough an employee. Furlough is not intended to be used for short-term sickness absence, but if an employee is currently off sick, they can still be furloughed. They will be entitled to ‘furlough’ pay rates when on furlough. If on sick leave they will be entitled to sick pay. They cannot get both for the same period.
Updated Guidance on shielding and protecting people who are clinically extremely vulnerable from COVID-19 was also published by the Government on 10 November 2020.