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Coronavirus Job Retention Scheme update

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On Friday 29 May Rishi Sunak announced three key changes to the job retention scheme:

  1. From 30‌‌ June the scheme will close to new entrants.
  2. From 1‌‌ July 2020, employers will be able to bring previously furloughed employees back part time and still receive a grant for the time when they are not working.  This change has been brought forward by one month from the original announcement.
  3. From 1‌‌ August 2020, employers will have to start contributing to the wage costs of paying their furloughed staff and this employer contribution will gradually increase in September and October.
  1. Closure of the scheme – key dates

The scheme will close to new entrants from 30‌‌ June. From this date onwards, employers will only be able to furlough employees who they have furloughed for a full three-week period prior to 30‌‌ June.

This means that the final date by which an employer can furlough an employee for the first time will be 10‌‌ June for the current three-week furlough period to be completed by 30‌‌ June. Employers will have until 31‌‌ July to make any claims in respect of the period to 30‌‌ June.

  1. Flexible furloughing

From 1‌‌ July 2020, businesses using the scheme will have the flexibility to bring previously furloughed employees back to work part time – with the government continuing to pay 80% of wages for any of their normal hours they do not work up until the end of August.

Employers will need to decide the hours and shift patterns their employees will work on their return, and will be responsible for paying their wages in full for the period they are working. This means that employees can work as much or as little as the business needs.

There will be no minimum time that they can furlough staff for, however, any working hours arrangement agreed between a business and their employee must cover at least one week and be confirmed to the employee in writing. When claiming the CJRS grant for furloughed hours, they will need to report and claim for a minimum period of a week. They can choose to make claims for longer periods such as on monthly or two weekly cycles if preferred. Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and also the actual hours worked.

If employees are unable to return to work, or employers do not have work for them to do, they can remain on furlough and the employer can continue to claim the grant for their full hours under the existing rules although the grant amount will reduce over the coming months – see the employer contributions note.

  1. Employer contributions

From August, the government grant provided through the job retention scheme will be slowly tapered.

  • in June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (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 continue to pay 80% of wages up to a cap of £2,500 but employers will be required to pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs that they would have incurred if the employee had not been furloughed
  • 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, pension contributions and 10% of wages to make up 80% of the 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, pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500
  • the cap on the furlough grant will be proportional to the hours not worked.

Many smaller employers have some or all of their employer NIC bills covered by the Employment Allowance so will not be significantly impacted by that part of the tapering of the government contribution.

Further detail on how to calculate claims with this extra flexibility will be made available by 12‌‌ June.

The Mercer & Hole team are here to support you and your business.

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