The latest lockdown means employers and employees will be depending on the furlough scheme until the scheme’s end date, currently in April. Nigel Morris, Employment Tax Director at MHA MacIntyre Hudson, says companies can handle the complexity if they follow a few important rules and have to be aware that application deadlines and eligibility criteria have undergone changes since the scheme began:
More employees are now eligible for furlough
The current CJRS scheme now covers employees on an RTI return at 23 October 2020. This applies to employees covered by the initial phases of the furlough scheme prior to 30 June 2020 but also new employees taken on after 20 March 2020 and before 23 October 2020, who were included in an RTI return in that period. So, if you put in a new furlough application now you need to bear in mind that more employees are potentially eligible for the scheme as the qualification criteria have changed.
There are new deadlines
On 1 November the deadlines for the furlough scheme changed. Claims now need to be made within 14 days of the end of the month they relate to and can only be amended up to 28 days after the end of the month that they relate to. So, if you didn’t claim for November 2020 that is now lost. Previously, you could claim months in arrears, so if the last time you submitted a claim was in July and think you still have plenty of time to put your claim in, think again.
CJRS is fairly flexible
CJRS full and or flexi-furlough. Full furlough allows you to furlough an employee for (say) a week where they are not expected to undertake any work at all. Flexi-allows you to furlough an employee for a set amount of time, for example a week, but require them to work some days or hours in that set time (i.e. that week). For example, instead of eight hours a day, they could work four hours and then be furloughed for four hours.
CJRS does not cover NIC and statutory pension contributions
CJRS covers regular, contractual wages up to the 80%/£2,500 per month cap, but this is in reality a daily cap with the £2,500 divided by the number of days in the calendar month. It does not cover the associated employers NIC and statutory pension contributions which employers must pay for themselves.
Beware annual leave and furlough calculations
Furloughed employees can take annual leave while on furlough, but you must pay them 100% of their pay in line with working time regulations that govern how much holiday pay they are due. This can become complex because a standard furlough claim is based on ‘reference pay’ for the period prior to 20 March 2020 (or 23 October 2020). However, holiday pay is calculated differently and based on a rolling average. This means an employee’s holiday pay could be higher than the reference pay and if so an employer may not be able to claim 80% of the full holiday pay back.
If you want employees to use up accrued and unused leave you must give them notice of at least double the time you want them to take. So if you want them to take a week’s leave you need to give them two weeks’ notice in advance of this.
Overall CJRS is still very good news for employees, who may otherwise be formally laid off or made redundant and is still quite good news for employers. Of course, how much longer employers can support the NIC and pension commitments associated with CJRS remains to be seen and only a successful mass vaccination programme offers a way out.
Find out more at MHA MacIntyre Hudson