Coronavirus Job Retention Scheme V2 – what employers need to know

On 29 May 2020 the Chancellor announced substantial changes to the Coronavirus Job Retention Scheme (CJRS) with a view to winding it down over the summer as the lockdown restrictions are eased. The updated scheme - dubbed "CJRS V2" - and revised rules will apply from 1 July 2020, so we recommend considering these and how they will work for your business now.

When do we need to take action?

The urgent point to note is that the CJRS will close to new entrants on 30 June 2020, meaning that the last date that you could place an employee on furlough would be 10 June 2020. This is discussed in more detail below but means that, if your business is currently using the CJRS or is considering using CJRS V2, steps must be taken in the next ten days to agree new periods of furlough with the relevant employees.

Planning this week is therefore essential to avoid being caught out by the new cut-off date.

Remember that new periods of furlough or extensions to existing furlough arrangements must be agreed with an employee in writing (or as evidenced by written collective agreement where agreement has been reached with Trades Unions in relation to a group of employees). These documents must be kept for a period of five years.

Whether to offer furlough remains at the discretion of the employer, as does requiring an employee to return from furlough.

What is changing?

For July the grant will be available on the same basis as now (the lesser of 80% of pay and £2,500). The intention is that the government will reduce its contribution over the remaining months of the scheme – August to October – with a corresponding increase in the employer contribution. The increases are described further in the table below.

Flexible furloughing

The revised scheme has many of the same features as the existing scheme but from 1 July 2020 (i.e. a month earlier than previously announced), employers will be able to operate a system whereby employees will be able to work part-time and be furloughed part-time (provide that they are employees who have already been placed on furlough under the scheme on at least one occasion prior to 10 June 2020.)

This part-furlough part-work split can follow any pattern that the employer and employee agree (with a need to report and claim for a minimum period of a week), but the agreement has to be confirmed in writing between the parties.

The concept is that the employer pays the employee as they normally otherwise would for the portion of the employees 'usual hours' that the employee works in the week in question (including paying tax and NI on those amounts) and that a claim can be made under the scheme for the remaining portion of the 'usual hours' that the employee doesn't work (and are on furlough) for that given week. 

Employers will be required to submit data on the 'usual hours' an employee would be expected to work in a claim period and actual hours worked. Further details around precisely how these calculations will work will be included in future guidance to be published on 12 June 2020.

Closure to new entrants

Notably, the CJRS will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three-week period at some point prior to 30 June.

This means that the final date by which an employer can furlough an employee for the first time will be the 10 June, in order for that first three-week furlough period to be completed by 30 June.

There will be a new maximum limit to the number of staff who can be included on a claim. This will be based on the maximum employees ever included in a single claim under CJRS V1.

Rotating furlough arrangements

Some employers have been operating rotating furlough patterns of, for example, 3 weeks of furlough followed by a week back at work, to maintain skeleton staffing throughout. This will still be possible under CJRS V2.

Employers who have had one set of employees working throughout, and one set continuously furloughed may now wish to consider rotation where possible to balance the impact on employees.

Making a claim

  • Employers will have until 31 July to make any claims in respect of the period to 30 June.
  • From 1 July the scheme will only be available to employers that have previously used the scheme in respect of employees they have previously furloughed. 
  • From 1 July, claim periods will no longer be able to overlap months, employers who previously submitted claims with periods that overlapped calendar months will no longer be able to do this going forward. This is necessary to reflect the forthcoming changes to the scheme. 
  • The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS. 
  • Employers can continue to make claims in anticipation of an imminent payroll run, at the point payroll is run or after payroll has been run.
  • Employers will be able to make their first claim under the new scheme from 1 July.   

Employer costs

From August 2020, the level of the grant will be slowly tapered to reflect the fact that people will be returning to work:

  • In June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance Contributions (ER NICS) and pension contributions for the hours the employee doesn’t work. Employers will have to pay employees for the hours they work.
  • In August, the government will pay 80% of wages up to a cap of £2,500 and employers will pay ER NICs and pension contributions for the hours the employee does not work.
  • In September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
  • In October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. The cap will be proportional to the hours not worked.

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