Extending furlough via the Coronavirus Job Retention Scheme

Daniel Ferguson

This is a fast-moving issue and should be read as correct at the time of publication (03.11.20).

On Saturday (31 October), as Prime Minister Boris Johnson announced a new national lockdown for England, he said the ‘furlough scheme’ will be extended.

Officially named the Coronavirus Job Retention Scheme (CJRS), its extension has been broadly welcomed but also criticised as overdue.

Mayors in the north of England and leaders of the devolved nations questioned why they had not been offered 80% wage support earlier, despite already having entered strict lockdowns.

This Insight explains what’s been announced, which workers are eligible for the extended CJRS and how Parliament will scrutinise these measures.

New restrictions on businesses and workers

Under new lockdown restrictions coming into force in England on 5 November, businesses in a range of sectors will be required to close. These include non-essential retail, leisure, entertainment and hospitality. Workers will only be allowed to go to the workplace if they are unable to work from home. Workers who are clinically extremely vulnerable to Covid-19 will be advised not to go to the workplace. The restrictions will be in place until at least 2 December.

The Prime Minister announced the CJRS will be extended “until December”. The CJRS had been set to end on 31 October to be replaced by a new Job Support Scheme (JSS) but this has now been postponed.

Who is covered under the extended scheme?

According to the Treasury press release, the extended CJRS will cover anyone employed on 30 October on a PAYE payroll, as long as this was notified to HMRC by their employer on or before that date.

The CJRS uses the term ‘employee’ but this can include people in various working arrangements, such as agency workers or those on zero-hours contracts.

Under the original CJRS, there was also a rule that eligible employees could not be furloughed after 1 July unless they had been furloughed at least once between March and June. It’s not clear if this rule still applies for those being furloughed from 1 November.

How much support will be available under the extended furlough scheme?

The rate of support under the CJRS has varied over time. According to a Treasury, the rate of support during November will be the same as August. This means employers can ask employees to work any pattern and claim a CJRS grant for any ‘usual hours’ not worked.

For hours not worked, HMRC will provide a grant covering 80% of wages (up to £2,500 per month). Employers will only have to cover employer National Insurance and pension contributions.

This is more generous than the CJRS in October, when HMRC only covered 60% of wages with employers topping up 20%. It is also more generous than the JSS for businesses required to close (JSS Closed), where HMRC would only have covered 67% of wages.

It appears from the Treasury press release that most of the CJRS rules will remain unchanged, meaning that ‘wages’ will continued to be defined as excluding payments like tips and dividends.

What about people made redundant?

One key question is the eligibility of employees who were set to be made redundant on or around 31 October. Once a notice of redundancy is properly issued, it fixes the date a job ends, although employers and employees can agree to postpone it.

As the extension of the CJRS was announced on 31 October, it’s likely that many people due to be made redundant, will not have had their notice period extended. It’s unclear whether employees in this position can be re-employed and furloughed. Law firm Lewis Silkin LLP notes that even if this is allowed, employers will be under no obligation to re-hire.

What has the reaction been?

The Confederation of British Industry said extending the CJRS was a “vital step”, while the Trades Union Congress said it was, “long overdue and necessary.”

There’s been particular criticism that the 80% wage support is being introduced now. The Government had previously voted against a motion calling for increasing support when areas in the north of England and the devolved nations went into stricter lockdowns. At the time, the Government said support under JSS Closed, together with support grants to local authorities and Universal Credit, was sufficient.

Andy Burnham, the Mayor of Greater Manchester, has called for the 80% wage support to be backdated to when areas were placed under Tier 3 restrictions. Mark Drakeford, the First Minister of Wales, argued that the change was unfair to Wales, which has been in a national lockdown since 23 October. Nicola Sturgeon, the First Minister of Scotland, has asked whether the CJRS will be retained in the future for devolved nations going into lockdowns.

Responding to questions in the Commons on 2 November, the Prime Minister said the CJRS was a “UK-wide scheme.” He also said that furlough would be “available” to devolved nations if they needed it “in the future.”

What happens next?

The Prime Minister said the lockdown legislation for England will be published today (3 November) and Parliament will be asked to vote to approve it on 4 November, before it comes into force.

The rules of the CJRS will need to be formally changed by new Treasury Directions. These are not subject to a vote in Parliament, so the scheme can be extended directly by the Treasury. The Government will also need to update its CJRS guidance.