Partner Article

Wrestling with an octopus: changes to the Coronavirus Job Retention Scheme

By James Wilders, employment partner at law firm Womble Bond Dickinson

Getting to grips with the furlough scheme is like wrestling with an octopus – every time you think you have it under control, another tentacle in the form of a new piece of HMRC guidance appears and you have to start again.

On 29 May the Chancellor of the Exchequer, Rishi Sunak, announced some major changes to the scheme. These are intended to achieve two aims:

1. To make the scheme more flexible
2. To wean employers off it by gradually reducing the level of support available from the Government.

The changes avoid a cliff edge scenario, which employers and employees alike were fearing. If the scheme had ended completely on 1 July then it was feared that this would have generated mass redundancies. However, employers are going to have to make an increasing contribution towards the costs of furlough leave, as this article describes. There is genuine concern that this may be enough to tip some employers over the edge and generate redundancies anyway.

Increasing flexibility

Furloughed employees will be able to work part-time from 1 July. Employers will have complete flexibility to decide how this will work and there is no requirement for employees to return for a minimum or maximum number of hours. Employers will have to agree the new flexible furloughing arrangements with employees and confirm them in writing. The employer will then pay for the hours worked (plus employer National Insurance and pension contributions) and claim for the hours not worked under the scheme. When making a claim, the employer will need to submit data on the usual hours their employee would be expected to work in a claim period and the actual hours worked. The minimum claim period will be one week. The cap on the furlough grant (see table below) will be proportional to the hours not worked.

Where an employee is unable or unwilling to return to the workplace, an employer will need to tread very carefully and explore alternative options. Employees have a right not to be dismissed or subjected to a detriment for bringing to an employer’s attention circumstances they reasonably believe are potentially harmful to health and safety. They may also have claims under the discrimination and/or whistleblowing legislation. We will be covering this topic in more detail in a future webinar and article.

Reducing support

From 1 August, employers will pay employer National Insurance contributions and minimum auto enrolment pension contributions (which they were previously able to claim for). During September and October they will pay an increasing contribution towards furloughed employees’ pay and from 1 November, they will pay the full amount.

Payroll costs will increase substantially from 1 November and we expect to see a large number of redundancies before then, unless the economy returns to normal very quickly.

Other changes

The scheme will be closed to new entrants from 30 June. An employee must therefore have been furloughed for the first time by 10 June to allow for the three week minimum furlough period to be completed by 30 June. In a written statement made to the House of Commons on 3 June, the Chancellor clarified that this means employees being furloughed for the first time must be placed on furlough on or before 10 June. From 1 July, there will be no minimum furlough period however the scheme will only be available to employers that have previously used it and an employer will not be able to claim for more employees than it has in a previous claim period. Employers planning to claim a grant from 1 July must have completed their first claim (for the period ending 30 June) by 31 July.

Areas of uncertainty

HM Treasury released a press release and published a factsheet on 29 May to explain the changes. These documents gave rise to a number of queries, such as:

• Does the proportional cap apply from 1 July? • Can employees be furloughed on a rota basis after 1 July? • If there is a second wave of Coronavirus after 1 November, will the scheme be extended? • Will there be any additional help for sectors that cannot open yet, such as hospitality?

We are expecting further guidance on flexible furloughing and how to calculate claims on 12 June, which may answer some of these questions but will come too late to deal with any queries on furloughing employees for the first time on or before 10 June.

Six steps that employers need to take now

In order to prepare for the changes, you should:

1. Decide whether you will continue to furlough employees after June and on what basis.
2. Ensure that anyone you may want to furlough after 30 June has been furloughed for the first time on or before 10 June and make sure that you have completed your first claim (for the period ending 30 June) by 31 July.
3. Work out how many employees will need to be furloughed from 1 July and check that you have already made a claim for at least that number of employees.
4. Decide whether redundancies will be necessary and, if so, when. The key question will be whether you can wait until you have to fund 100% of the payroll costs from 1 November or whether you need to make redundancies in preparation for August, when you have to start making a small contribution.
5. Consider the number of redundancies; if it is likely to be 20 or more, collective consultation will be required, which will take longer and may involve electing employee representatives.
6. If you intend to bring employees back to work part-time, discuss and agree a working pattern with them and confirm it in writing.

This was posted in Bdaily's Members' News section by Womble Bond Dickinson LLP .