The Chancellor has announced the government’s plans to change the CJRS which will now be changed to support businesses sending staff back to work. Employers will be able to put staff on part-time furlough and claim the CJRS grant for a portion of their salary. Employers will only be able to claim going forward for an employee if they have previously claimed for that employee under the pre-1 July scheme.
As there is a three-week minimum furlough requirement under the current rules, this means that any new period of furlough leave must have started by 10 June 2020 to be complete when the current scheme ends on 30 June and so ensure the employee remains eligible from 1 July.
The changes also introduce a new limit to the number of staff who can be included on a claim. This will be based on the maximum staff ever included in any single pre 1 July claim. The Chancellor also confirmed that from 1 August the CJRS grant will no longer cover the cost of employers’ National Insurance nor pension contributions with employers expected to cover these costs.
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 plus employer’s NI and pension contributions). 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.
- August – the CJRS will continue to pay 80% of wages (or £2,500 if lower), with NI and pension no longer funded as noted above
- September – the CJRS will pay 70% of wages (or £2,187.50 if lower) while employers will take on the other 10%
- October – the CJRS will pay 60% of wages (or £1,875 if lower) while employers will take on the other 20%
Note that it is not permitted to reduce a furloughed worker’s pay below 80% of wages in September/October – the employer must actually fund the shortfall themselves.
The revised scheme has many of the same features as the current scheme which runs between 1 March and 30 June 2020, but there will be some significant changes intended to encourage those previously furloughed back to work. In summary, these are:
- Employees who were previously furloughed will be able to return to work on a flexible part-time basis.
- For those staff who are furloughed part-time, employers will be required to pay for the cost of the time staff are working. A grant will be available for the cost of their furloughed hours.
- Employees must have been furloughed under the current scheme (CJRS V1) for them to be eligible for a furlough grant under the revised scheme. So, in practice, only employees who have been included in a furlough grant claim made before 1 July 2020 can be furloughed under CJRS V2.
The rules for CJRS V1 covered only the period 1 March 2020 to 30 June 2020, para 12, The Coronavirus Act 2020 Functions of her Majesty’s Revenue and Customs (Coronavirus Job Retention Scheme) Direction. This means the furlough scheme is closed to new entrants after 30 June 2020.
Further information re CJRS V2
- A new minimum reporting period of one week will apply from 1 August 2020. More frequent claims will not be accepted, but the reporting period can be longer.
- 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 grant will be based on the same premise as now, so the employee must be paid the lesser of 80% of reference salary and £2,500 per month. The government contribution to the 80% of reference salary is being reduced as the scheme progresses.
- From 1 August onwards, the scheme will no longer cover the cost of employers’ National Insurance nor pension contributions applicable to the grant.
- The new calculation will apply from 1 July to factor in the cost of hours worked to hours furloughed ratio.
- Employers can claim the grant for the hours their employees are not working calculated by reference to their usual hours worked in a claim period. Further details will be included in future guidance.
- Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
- For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts
- 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 staff ever included in a single claim under CJRS V1.
- CJRS V2 will end on 31 October 2020.
A new factsheet giving further details on the changes to CJRS and SEISS is available from gov.uk.