Extension To The Furlough Scheme...Again

Earlier this year the government introduced the Coronavirus Job Retention Scheme (CJRS) to help employers fund the wages of staff that they had to furlough (put on a leave of absence), also commonly know as the furlough scheme. It was originally intended to run for three months from March but then more flexibility was introduced from July so that staff could come back to work part-time, and the scheme was extended and expected to finish by the end of October 2020, to be replaced by a new Job Support Scheme.

However, following the Prime Minister’s announcement of a further lockdown on 31st October, the furlough scheme was extended again, with the intention then of this being until December. Then several days later on 5th November, the Chancellor announced this will actually now be extended to 31st March 2021, effectively postponing the previously announced Job Support Scheme indefinitely. And breathe...

The scheme will run very similarly to the way it was run previously. The main points to note are;

• Employers can reclaim 80% of their furloughed employees’ wages, up to a maximum of £2,500 per month, pro-rated if on flexible furlough, so the grant payment is only applicable for hours not worked.

• Employers will still need to pay the employers’ NI and pension contributions.

• Unlike before, staff not previously furloughed can still be furloughed under the new scheme, provided they were on the payroll and an RTI was submitted on or before 30th October.

• The claim must be submitted within 14 days after the end of the month you are claiming for.

• The flexible furlough scheme arrangement can still apply, enabling staff to work part-time and be furloughed for the rest of the time.

• Anyone who was on your payroll on or before the 23rd September may be re-employed provided an RTI submission had been made by this date.

• To be eligible you must confirm in writing to your employee that they have been furloughed, and this can retrospectively apply from 1st November if an employee had not been working but agreement must be in place in writing by 13th November - this is a key point.

• The original rules apply that an employee or officeholder must not work for the business whilst on furlough, except for dealing with statutory obligations. An individual can still work elsewhere.

As a result of the above changes, it is worth noting that the Job Retention Bonus has now been scrapped. So that £1,000 that you may have been expecting in February for keeping an employee on the payroll through to January will no longer apply as the newly adapted furlough scheme has overridden that.

There is no question that the last six months have been tough, but it is anticipated the next six months will be equally, if not more, tough for many businesses. This new scheme gives businesses more flexibility to furlough staff that had not been furloughed before to avoid mass redundancy, in line with the needs of the business.

Like any change of contract and terms, there are HR requirements, and unless you already have such terms written into your original contract of employment you will need to agree the new arrangement with your employee in writing. In any event, you must still have it in writing regardless of your contract terms, to meet with the HMRC guidelines. You should retain your furlough records for at least 5 years.

Therefore if you are considering furloughing an employee and wish to utilise the scheme over the coming months, make sure you plan in plenty of time, put it in writing at the earliest opportunity, and get in touch if you need our support and guidance.

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FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.