Coronavirus Job Retention Scheme - Phase 2

The new Coronavirus Job Retention Scheme will come into effect on Wednesday 1 July 2020. In this section we give an overview of how the new scheme will work and actions for employers to take now. 

This is how we understand the Government guidance in it’s current form but we await the third Treasury Direction being published in due course and we'll amend the contents on this page as necessary.

The current scheme: For information and FAQs concerning the Coronavirus Job Retention Scheme in it's current form (which is live until 30 June 2020) please visit of our Coronavirus Job Retention Scheme Phase 1 page.

An overview of the scheme

The Government has published the details of how the Coronavirus Job Retention Scheme (CJRS) will work from Wednesday 1 July. The principle of what the Government is trying to achieve is relatively simple – from July, employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked. From this date, only employees that you have successfully claimed a previous grant for, will be eligible for more grants under the scheme. From August, employers will need to start contributing to furloughed wage costs (to a maximum of 20 per cent by October plus Employer NI and Pension contributions on the entire furlough pay), whether or not the employees are working.

However, the reality is that the calculations required to make a claim under the new arrangements are even more complicated than under the existing scheme. Most of the government’s guidance on the CJRS (and there is a lot) has also been updated, and several new guidance documents have been published across multiple sites so there is a great deal for employers and advisers to take on board.

The introduction of flexible furloughing will make the CJRS more complex. This, in turn, will place an additional burden on employers when seeking to ensure compliance with the CJRS. Employers should check that their human resources, legal and payroll functions are properly geared up to comply with the new requirements.

Employee relation matters

There is undoubtedly a great deal of benefit to employers in being able to reintroduce individuals back into the working environment on a flexible basis. The employer and employee can agree whatever pattern they see fit. However, the complexity of running calculations to work out a claim in respect of a flexibly furloughing employees  may deter many. Equally, for an employer who is looking to organise a flexible return to work scheme  it’s important to know that employees can, we understand, validly refuse their consent to a partial return to work. This may make it more difficult for the employer to organise a structured return to work, especially if those returning are concerned about health and safety issues and see other employees refusing to return. We encourage all employers to seek legal guidance around employee relation matters.

A snapshot of the key points

  • No new employees can now be furloughed, unless they are returning from statutory parental leave.  Further information on parental leave furlough entitlement can be found here.
  • From 1 July, there is no minimum furlough period and employees can be brought back part-time for any hours or shift patterns agreed between employers and employees. Full furlough will still be possible.
  • Employers will bear the cost in full for any hours worked by furloughed employees and can claim a furlough grant to cover the balance between hours worked and employee’s “usual hours”.
  • The minimum HMRC claim period is seven calendar days. Employers will not be able to make claims that cross calendar months.
  • The new rules on claim periods and the calculations for flexible furlough are potentially complicated, so it is worth employers spending time now planning staff working arrangements for July onwards and getting their heads around how to claim.
  • From August onwards, employers will need to start contributing to the cost of furlough payments. The JRS will end on 31 October 2020.
  • Employers will only be able to furlough employees who have been furloughed for a full three-week period prior to 30 June 2020.

Agreeing flexible furlough

Having determined what working patterns best suit the business, the employer then must seek to agree this with the employee (or trade union where collective bargaining applies). As before, the arrangement needs to be recorded in writing and notified to the employee, and a copy needs to be kept by the employer for six years. Existing furlough agreements, may need to be replaced by new agreements where the employer intends to make use of the new flexible scheme, setting out the new working arrangements.

Making a claim under CJRS

The rules relating to the claim process itself have also been updated.

Any claim in respect of the period before 30 June 2020 must be made by 31 July 2020.

From 1 July 2020, claim periods must start and end within the same calendar month and must be at least 7 days (unless the claim includes either the first or last day of the calendar month, and the employer has already claimed for the period ending immediately before it). Claims cannot span multiple calendar months, but an employer can make more than one claim per month.

There are also restrictions on the number of employees an employer can claim for with effect from 1 July 2020. This cannot be more than the maximum number of employees claimed for under any claim by the employer prior to 30 June 2020. For example, if an employer made CJRS claims in April, May and June for 40, 50 and 60 employees respectively, the maximum number of employees that can be claimed for post-1 July 2020 will be 60. There are exceptions to this, such as in relation to TUPE-inherited employees and employees returning from family-related leave after 10 June.

How much can be claimed?

The guidance sets out complex rules for calculating the amount which can be claimed under the CJRS, supported by the updated calculator and a set of examples working through different scenarios.

Simply put, an employee is entitled to 80% of their wages for the proportion of their usual working hours spent on furlough.

The starting point of the calculation of flexibly furloughed employees therefore is the employee’s “usual hours” and determining this will depend on whether the employee has fixed or variable hours and pay:

  • For employees with fixed hours, the employer takes the number of hours worked in the pay period before 19 March 2020.
  • For employees with variable hours, the employer takes the higher of:
    • The average number of hours worked in the tax year 2019 to 2020; or
    • The corresponding calendar period in the tax year 2019 to 2020.

Records of all CJRS claims and calculations must be kept by an employer for at least six years and should include:

  • Amounts claimed, calculations used and the claim periods
  • Claim reference number
  • “Usual hours” worked by employees who have been flexibly furloughed (together with calculations used)
  • Actual hours worked/furloughed by flexibly furloughed employees.

Actions for employers

Now that the Government is beginning to ease restrictions for many businesses, employers will be considering their resourcing requirements. Where they intend to make use of the Flexible Furlough Scheme, they should note the following action points:

  • Assess the appropriate flexible arrangement; will employees be furloughed on a rota basis such as week on, week off or will employees be furloughed part of the week and work the remainder, or perhaps work a reduced number of hours every day, or a combination of all options?
  • Discuss the proposed arrangements with employees and obtain agreement. New furlough agreements will need to be drawn up to reflect any new, flexible arrangements.
  • Where employees are being brought back from furlough, whether fully or partially, ensure timely communication and guidance about COVID-secure working practices to allay any concerns about COVID-19 risks in the workplace.
  • Review information held within payroll systems to ensure “usual hours” are correct, up to date and reflect contractual arrangements.

HMRC has issued additional detailed guidance relating to the calculations, including some worked examples, which you can find here.

Coronavirus Job Retention Scheme FAQs

Your questions answered - we've put together a useful overview of the most frequently asked questions regarding the new Coronavirus Job Retention Scheme, visit our FAQS section now.