The Job Retention Scheme, also known as the furlough scheme, was extended on 5th November to 31 March 2021.The government confirmed that grants will remain at 80% to employers until a review is held in January 2021. This appears to mean they will keep the grant at 80% until the end of January 2021.

February and March 2021 could be at a reduced percentage – depending on the lockdown and economic conditions at that time.

Employers will remain liable to the Employers National Insurance costs and the Employers Pension contributions for employees.

Further guidance has been released about the extension and there are a few key changes you need to keep in mind. The changes make it a little harder to conduct planning using the furlough scheme and if you have anyone returning from maternity leave, you may need to take immediate action. Other changes might impact your broader plans.

Employees returning from maternity leave

If you have staff returning from maternity or shared parental leave who you will seek to furlough on their return to work, then you now face a longer lead time to set this up.

In an effort to prevent people from ending maternity leave early in exchange for being furloughed (and increasing their pay significantly while remaining off work), HMRC have now stipulated that for a person returning from maternity leave that they have to give at least eight weeks’ notice before being furloughed unless you meet certain circumstances which are yet to be confirmed. Who can plan eight weeks ahead at this time?!

If you have a member of staff returning from maternity who you either don’t have enough work for, or who you think is at risk, and would prefer to stay in some form of shielding then you would need to get an agreement from them now to be furloughed on their return.

In fact, in light of this ruling it might be advisable to get all staff on maternity leave to agree to be furloughed on their return. This way you have hedged your bets. If they need to be furloughed, they then can be and if it turns out they don’t need to be furloughed by then there is nothing stopping you from employing them as normal on their return, despite the agreement.

Redundancies while on furlough

Redundancies whilst on furlough may not be possible in December

The original furlough scheme was able to fund 80% of staff wages when on their notice period where businesses had, sadly, to make redundancies. The extended scheme states that from 1st December furlough grants will not cover any form of notice period, whether contractual or statutory.

It appears that if you have staff on their notice period who are furloughed that this is ok for November. For any employees that are currently serving notice periods which will run into December, you will not be able to claim any grant at all for 1st December onwards.

You can re-engage people that left after 23rd September from 1st November but whilst it is kind, it may not be appropriate for your business.

They will accrue holiday and you will need to decide what you would do at the end of the furlough period; do you make them redundant again? (Be careful not to use the work re-instate as this can deem the employee to have no gap in service which could make redundancy expensive if you have to do it a second time around!)

It also restricts the ability for businesses to use furlough as a tool to rearrange their business to come out the other side leaner, but more able to respond to the economic climate. I fear that this rule change will actually lead to more business failures, and more lost jobs than if they had kept to the original guidance.

Furloughing instead of putting on sick leave

A common question we get is “my employee is self-isolating; can I furlough them?” One reading of legislation and contracts would suggest this should fall under sick pay, however the guidance leaves this to the employer’sdiscretion.

If you have an employee on short term sick or self-isolation, then they should receive SSP. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so.

If you have an employee on long term sick, or who are clinically extremely vulnerable, then you can furlough them. If your employee becomes sick while furloughed, then you should continue to furlough them until the agreed date.  You cannot pay SSP and claim furlough at the same time.

However, you should check your employment contracts, in some cases employees might be better off being paid sick rather than furloughed and you don’t want a tribunal on your hands!

There is an expectation that additional guidance will be given at a later date on these matters.

The cost of furloughing over the holidays

With Christmas on the horizon it is worth remembering that staff who take holiday or bank holidays while furloughed are entitled to full pay for those days even if they are furloughed.

This means you will need to top up furloughed workers pay on Christmas Day, Boxing Day, and New Year’s Day. Alternatively, you can top up their pay on their return.

It’s important to remember that employees on furlough are also accruing holiday entitlement (much like a staff member on maternity leave does). You can ask for the employee to take certain days as holiday whilst furloughed (giving the appropriate notice period before they have to take the day as holiday).

The advantage of paying the top up is that it will mean they have less holiday rolling over to the next two years which could cause issues on the recovery – or add to the costs if the employee left without taking this holiday at a later date.

HMRC deem claiming for the two weeks your business is shut for the holiday period to be abusive, so make sure that you are only continuing to furlough if furlough was in place prior.

If an employee requests to isolate for two weeks prior to Christmas and are unable to work from home, then this should also be paid as SSP.

Other points you should be aware of

  • Don’t forget that any furlough claims up to 31 October need to be filed by 30 November
  • From 1 December, within 3 months, HMRC will publicise the employer name and how much was claimed from the furlough grant. This will be removed from their records after 12 months. Some people deem this to be a possible reputational risk so be mindful for future contracts you may be trying to obtain
  • To avoid any false claims, employees are going to be notified if their employer has furloughed them on their online tax account with somewhere for them to notify HMRC if they believe there has been an error
  • Guidance for directors making a furlough claim:
    • If you have switched to monthly, like many of our clients that we run payroll for, you can put in a claim for 80% of your salary as at 30 September 2020 up to £2,500
    • If you remained on the annual scheme, then there is no specific agreement on this, but it has been suggested that you apportion the salary you were paid for the 2019/20 tax year over 12 months
  • Furlough claims have to be submitted within 14 days and not a month
  • There are over 6 million people on Universal Credit and 40% of them are working. You need to make sure that you get the payment date right on your December RTI submission. If you normally pay on 25th for 11 months of the year but bring the payment forwards for the Christmas period to say 14th December, ensure the payment date on the RTI submission states 25th December otherwise you will cause havoc reflecting two periods of pay in December and nothing in January.

As always, if you have any questions about anything mentioned in this article or we’ve missed something, please get in contact with us by emailing or calling 01474 853 856.

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