On 29 May the Chancellor outlined further details on the second phase of the Coronavirus Job Retention Scheme (CJRS), which has been extended until the end of October. This includes introducing flexibility into the CJRS from 1 July 2020, a month earlier than previously announced, and asking businesses to contribute to the pay of employee’s furloughed hours from 1 August 2020.
The introduction of flexibility from next month gives businesses the option to bring furloughed employees back part time. Employers will be able to agree any working arrangements with previously furloughed employees, affording businesses a high degree of flexibility to decide the hours and shift patterns their employees will work on their return. Employers will pay their employee’s wages for hours worked (and associated NICs and pensions contributions) as per their employment contract.
The trade-off of increased flexibility means that the CJRS will be closed to new entrants from 30 June. From thereon in, it will only be available to employers that have previously used the scheme in respect of employees they have previously furloughed. To complete the three-week minimum furlough period before this date, it means that the final date by which an employer can furlough an employee for the first time will be the 10 June.
From August 2020, the level of government grant provided through the CJRS will be slowly tapered. In June and July, the Government will continue to pay 80% of employee’s salaries up to £2,500, with no employer contribution. In the following months, businesses will be asked to share the cost of the CJRS, while employees will continue to receive 80% (up to £2,500) of their salary. Employers will still be able to choose to top up employee wages above the scheme grant if they wish.
The update to the scheme means that the payment of employee’s wages will change in the following way:
- June and July: The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything
- August: The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed
- September: The government will pay 70% of wages up to a cap of £2,190. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed
- October: The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
Note that more detailed guidance about how the second phase of the CJRS will work is expected to be published on 12 June. For more information about the upcoming changes, please see this Gov.uk factsheet.