Furlough scheme extended until March 2021
The Chancellor has just announced a further extension of the Coronavirus Job Retention Scheme until the end of March 2021.
As the second national lockdown commences today, in a statement to the House of Commons this afternoon, the Chancellor stated that:
- the lockdown was still intended to remain in place until early December; however
- following the recognition that the economic effects are much longer lasting for businesses; the furlough scheme has been extended to give staff and businesses ongoing security throughout the winter.
What’s the cost?
The level of grant will remain at 80% of employee’s wages, which is more generous than the scheme that was in place in September and October.
For the hours not worked, the government will continue to help cover costs up to 80% (cap of £2,500 pcm) and employers will only need to pay for NICs and pension contributions for the hours not worked.
The government will review the policy in January to decide whether economic circumstances are improving enough to ask employers to contribute more.
Do staff have to have been furloughed previously in order to be eligible?
No, employers can use the grant even if they, or the employees themselves, have not previously been furloughed under the scheme to date.
Flexible furlough is still available giving businesses the flexibility to decide on the level of hours needed, or alternatively, whether to keep staff fully furloughed.
Employees who are extremely clinically vulnerable and currently shielding again can be furloughed, although this is not a requirement.
Welcome support and consistency:
There have been a number of changes to the furlough scheme announced over recent weeks, so the extension (in effect re-starting) of the furlough scheme will be welcome news for many businesses.
The Job Retention Bonus has been scrapped and the Job Support Scheme has been essentially replaced by the extended furlough scheme for the time being.
What about ongoing restructures and redundancies?
For many businesses and staff, the extension will provide much needed relief. However there are a number of businesses who will have carefully planned and prepared to either commence, or are mid-way through, redundancy consultation processes and restructures. This extension/re-start will naturally raise queries on how this announcement impacts upon those plans.
If today’s announcement is really an extension to the current scheme, then we anticipate that the guidance will not change, and there will be no grant condition preventing staff from being made redundant during the furlough scheme. However, the position on whether or not this will make the dismissal unfair remains an untested issue.
It is difficult to determine whether an employment tribunal would find such a dismissal to be unfair at this stage. In accordance with the test for reasonableness, this will depend on the particular circumstances of the case, which includes the size and resources of the employer. Therefore the financial position of the employer, the extent of the restructure and the ongoing viability of those roles will clearly be relevant issues. There will be some instances where jobs are genuinely eliminated or workplaces closed, so the extended scheme is somewhat irrelevant in those instances.
There is no requirement to furlough staff, however employers should demonstrate that they’ve actively considered furlough as an alternative to redundancy for each type of role that is proposed / considered for redundant. If your business decides to proceed with redundancies during the period of furlough, then it is vital to document the reasons why you’ve decided that furlough would not be suitable in the particular circumstances of that role, including the timing of those dismissals, the employer’s financial position and the ongoing viability of the role.
The HMRC Policy Paper has been published today. Full guidance is expected to be published on 10th November, with updated legislation to be published afterwards.
As always, we will keep you updated when we know more.