On Friday last week, 29 May 2020, some further changes were announced to the Coronavirus Job Retention Scheme.

First, as previously announced the scheme is extended until 30 October 2020, but its closed to new entrants from 30 June.  In Government’s words

“The scheme 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 3 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, in order for the current 3 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.”

Second, from 1 July 2020, Furloughed workers can be brought back part time.

“From 1 July, employers can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked. When claiming the CJRS grant for furloughed hours employers will need to report and claim for a minimum period of a week.”

Put another way, if an employer brings someone back part time, the employer meets the cost the reduced hours they work, the JRS applies for the balance between what they worked and their normal hours.  Currently JRS pays 80% of normal pay (see note 1) plus Employers NI and Minimum Pension Contributions, but this is being tapered down, see next point.

EG –

  • Billy normally works 40 hours a week.  He has been Furloughed since April
  • Billy’s employer can bring him back for 15 hours a week.
  • The employer pays Billy as normal for 40 hours
  • The employer can claim the JRS on the 25 hours which Billy remained Furloughed for

Note 1 – at the start of Furlough the employer will have to have agreed with Billy whether they were paying him 80% of normal pay or 100% – this isn’t something that can be imposed, under Employment Law Billy would need to agree if his pay was to reduce to 80%.  If Billy and his employer agreed that Billy’s pay drops to 80% then the JRS would have covered it all.  If they agreed that Billy’s pay remained at 100% then the employer would be meeting 20%.   This arrangement would continue for the ongoing part time Furlough.

Note 2 – cap of £2,500/m for JRS still applies – This is 80% of a maximum £3,125 pay/m

Third, the Government contribution is being tapered down

Up to end of July, the scheme remains unchanged – 80% of a Furloughed employees pay plus Employers NI and minimum pension contributions.  Remember a separate agreement is needed with the employee regarding paying them 100% or 80%.

For August – the 80% subsidy remains unchanged, but employers now pay the Employers NI and minimum pension contributions.

For September – the subsidy reduces to 70%.  The employer pays the balance of pay plus the Employers NI and minimum pension contributions.

For October – the subsidy reduces to 60%.  The employer pays the balance of pay plus the Employers NI and minimum pension contributions.

The cap remains.  Its often expressed as £2,500/m, but actually it was 80% of £3,125 pay /m.  £3,125/m remains, but for September becomes a 70% subsidy so £2,187.50 and for October 60% £1,875.

HM Government’s announcement re September and October isn’t written very helpfully.  For September, for example, it says, “The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500” – they have assumed that the employee is only being paid 80% of normal pay.  As explained above dropping an employees pay to 80% would need to be agreed, although presumably a rational employee accept that in lieu of redundancy.  If the employer was still paying 100% of pay then from September they are paying 30% not 10%.

Interpreting these percentages isn’t easy.  It helps to break it down into steps:

First the agreement between Employer and Employee:

  • The Employer reaches a Furlough agreement with Employee.  That could be at 100% of pay or 80% or something in between.  This is a matter of Employment Law.
  • Employer pays Employee on this basis
  • The agreement with employee continues as long as they are Furloughed irrespective of the reduction in the JRS

Then the Governments Grant to the Employer:

  • Under the original JRS a subsidy from Government to Employer of 80% of pay up to £3,125 maximum a month was available. 80% x £3,125 = £2,500/m
  • Employer could pay Employee more than this, but JRS wouldn’t apply on excess.
  • The 80% subsidy now starts to taper in September and October as above