1.1 What do the new rules mean and who is eligible under JRS#2 (or the Scheme)?
Full guidance has now been published – access to the new guidance can be found here. I would urge all of you to review this and the separate guidance which you can access from there or for ease, I have attached all the links at the end of this article.
Also published is a new Treasury Direction which can be found here –
The latest incarnation of the JRS has been designed in respect of the employee “whose employment activities have been adversely affected by the coronavirus and coronavirus disease or the measures taken to prevent or limit its further transmission.”
The extension to the JRS – JRS#2 - is due to commence from 1 November 2020 and last “until 31 March 2021” – UPDATE this has now been extended to 30 April 2021 - although the current Treasury Direction is only effective until 31 January 2021 so expect changes to the Scheme from February 2021.
Key Features of JRS#2
There is no maximum number of employees that an employer can claim for from 1 November 2020.
JRS#2 will apply to all employers across the UK, whether their businesses are open or closed, including charitable organisations, although there are restrictions, as before, on public sector employers’ ability to access the extended scheme.
All employers must have a UK bank account and UK PAYE schemes to be able to claim the grant.
As far as employees go to be eligible employees must be on an employer’s PAYE payroll by 23:59 30th October 2020. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC between the 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee. This would include those workers who were excluded from accessing the previous JRS scheme because their start date precluded their eligibility. For more details for what this means for employees who have been made recently redundant, see below.
Employees can be also be working on any type of employment contract, so would include those on zero-hours contracts. Note, that the self-employed would not be covered by the JRS#2. Separate guidance and support for the self-employed has also been announced and extended.
Neither the employer nor the employee needs to have previously used the JRS. Potentially JRS#2 is open to a wider class of worker as they do not need to have been on a minimum consecutive period of furlough to access JRS#2
Employers could choose to top up furlough pay if they wish.
Also, to remember that placing an employee onto furlough leave and claiming under JRS#2 is optional and not mandatory.
Flexible furlough is available.
Employers need the agreement of their employees before furloughing or extending furlough.
The rules relating to holiday/accrual and holiday pay will remain as they did under JRS#1, so something to think about here. As well as this, existing legal rights to SSP, maternity and other parental rights, rights against unfair dismissal, equality laws, redundancy payments and the right to be paid at least statutory National Minimum Wage for hours worked (and when training) remain also.
Claims under the JRS#2 remain a grant.
Key Future Changes to Note
There are some important changes that employers need to be aware of as this may impact upon your decision to access JRS#2.
The new guidance states “If you make an employee redundant, you should base statutory redundancy and statutory notice pay on their normal wage rather than the reduced furlough wage.” We knew that statutory redundancy pay had to be based on full pay but there is also clear reference to statutory notice pay too. However, the big change is that for claim periods starting on or after 1 December 2020, employers cannot claim for any days during which a furloughed employee is serving (so working) either their contractual or statutory notice and will need to fund notice pay themselves. This is going to have a huge impact on employers – particularly those who were minded to re-employ employees recently made redundant. Also, if their notice period straddles a 1 December period, the employer will need to amend their claim. This is potentially implying that JRS#2 is only there to support viable jobs.
Another point is that from December, the government are going to start publishing a list of the businesses who are claiming under JRS#2. This is presumably a fraud prevention tool but something to consider nonetheless. This has been updated so that December 2020 claims will be pubished from February and monthly thereafter.
Although the method for claiming is the same, the claim windows are shorter. For example, a claim for November 2020 must be made by 12 December 2020 and again for December, by 14 January 2021 and so on. Claim periods must start and end with the same calendar month.
Supporting documents to be kept for 6 years.
1.2 What is the rate of JRS#2 support?
The support under the JRS#2 will revert to what it was in August 2020 with the government funding up to 80% of normal wages for hours not worked, capped at £2,500 a month. Employers will have to fund Employer NICs and basic pension contributions. UPDATE – the government have said that it will fund 80% of pay (capped) for hours not worked until 30 April 2021.
Employees must pay their usual income tax and NICs on the grant and any full pay if on flexible furlough.
The whole amount claimed under the JRS#2 must be paid to the relevant employee. Employers cannot keep the grant to cover any costs or expenses. This is not allowed.
1.3 What “wages” should employers use?
Before claiming, employers will need to know (a) the length of your claim period, (b) what you can include when calculating wages, (c) your employees’ usual hours and furloughed hours PLUS (d) do they qualify under JRS#1 or JRS#2 – this will depend on their start/RTI date.
How wages are calculated for furlough purposes now will depend on whether an employee has been furloughed under JRS#1 or could have been but was not or if this is their first time. Employees who have been furloughed previously (or could have been), will continue to have their reference pay and hours based on the existing furlough calculations used under JRS#1. Nothing should change. This means that the calculation is based on wages payable to the employee in their last pay period on or before 19 March 2020 or for variable pay this will be the based on the calculation on the higher of the average wages earned OR wages payable in the corresponding calendar period in the tax year 2019/20.
However, employees who have not been furloughed before, so your new joiners from (20 March 2020) will have their pay/hours calculated by reference to:
For fixed wages - 80% of the wages payable in the last pay period ending on or before 30 October 2020;
For those on variable pay – 80% of the average payable between (these dates are inclusive) the start date of their employment or 6 April 2020 (whichever is later) and the day before their JRS#2 period begins.
In terms of “pay”, the definition is the same under JRS#1 so you can include compulsory overtime, but not voluntary, no tips or troncs.
1.4 What about hours?
As above, if the employee has previously been furloughed (or could have been but was not), their hours calculations will be based on what they were under JRS#1.
If an employee was not previously furloughed, then under JRS#1, where hours are fixed and whose pay does not vary, employers will use their contracted hours worked in the last pay period ending on or before 30 October 2020.
Where hours/pay varies and the employee has not been previously furloughed, then under JRS#2 employers will use the average of their usual hours worked between (these dates are inclusive) the start date of the 2020 to 2021 tax year, (for example, 6 April 2020) and the day before their furlough periods begins under JRS#2.
There are some useful calculations on the government website.
1.5 What about the Job Support Scheme?
The Job Support Scheme (open and closed), which was scheduled to come in on Sunday 1st November, has been postponed until the furlough scheme ends.
We should also add that the Job Retention Bonus has also been postponed (this was due to be paid at a rate of £1,000 per retained employee).
1.6 Flexible Furlough?
Under JRS#2, employers will have the option to fully furlough staff on a full time basis or retain staff on a flexible furlough basis, with the employer paying (in full) for hours worked and accessing the JRS#2 for hours not worked (subject to the cap on grants). Guidance says to work out what hours the employee is working/not working first before making a claim to avoid have to rectify claims. Again, flexible furlough is optional and provided hours/days are fixed for a minimum of 7 consecutive calendar days, employers are allowed to agree whatever working pattern they wish. Always ensure that this is set out and agreed in writing.
The JRS#2 cap s reduced based on the proportion of hours the employee is working/on furlough. So an employee is entitled to 50% of the furlough grant if they are furloughed for 50% of their usual working hours. For hours worked, the employer must pay the employee their normal, pre-furlough pay.
It is advisable to keep a record of hours worked and not worked – even where employees have fixed contractual hours. These records should be kept for 6 years.
1.7 What about those currently on furlough, do we have to bring them back to work now and re-furlough them?
No, employees who were on furlough and JRS# can continue onto JRS#2 so there will be a seamless transition from JRS#1 to #2. However, to retrospectively claim from 1 November 2020, employers MUST have a written agreement in place which is compliant in place by FRIDAY 13 NOVEMBER 2020.
Those previously unfurloughed would start furlough under JRS#2 when notified or retrospectively, subject to the deadline noted above.
1.8 What is the minimum furlough period?
7 consecutive calendar days. This means that employees could be on full furlough for one week and flexible furlough the next, for example, or stay of furlough full time for a week – full weeks are the key. There is no 3-consecuritve week rule, so more flexibility if employers want to rotate furloughed workers or use flexible furlough.
1.9 What about furlough and employees who are shielding?
The new guidance states that, employees can be furloughed where they are unable to work because they either shielding in line with public health guidance (or need to stay at home with someone who is shielding) or if they have caring responsibilities resulting from coronavirus, including employees that need to look after children. Whilst JRS#2 is not intended for short-term sick absences, employers may use the new furlough scheme for employees who are currently off sick (subject to eligibility requirements).
Furloughed employees who become ill for whatever reason, must be paid at least Statutory Sick Pay (SSP); however, employers may decide to keep the employee on furlough leave/pay instead.
If the employer does choose to move the employee from furlough to sick pay (SPP or company), it cannot reclaim these payments through the JRS. The employee is now “sick” and not “furloughed”- employees cannot be on furlough leave and sick leave at the same time. It would also appear to be “safer” to keep the employee on sick leave and not move them to furlough leave for the whole of the claim period rather than swapping mid-claim period. Although the guidance is not specific on this. However, employers with less than 250 employees can still take advantage of the SSP rebate rules introduced earlier this year for those who cannot work because their either have Covid-19 or because they are self-isolating. Where you do have employees who become sick whilst they are working under a flexible furlough arrangement and then are due to be furloughed it would be worth taking advice.
1.10 Can we make people redundant whilst they are in receipt of JRS#2?
Yes, there is nothing in the current guidance which precludes redundancies being made. Remember that there are rules around notice pay and entitlement to full pay/furlough pay. Statutory redundancy pay has to be calculated on the basis of full pay and not furlough pay. Also, the change from December relating to notice pay may make a difference to employers’ plans and make accessing JRS#2 less attractive. Employers can access JRS#2 where they are consulting with employees through a collective or individual process.
Be careful too of using JRS#2 until March 2021 and then making redundancies in April 2021 as this could lead to the business being investigated by HMRC in that the grant has not been used for its intended purposes. Although not published, there is an underlying shift in emphasis it seems in the purpose and emphasis on JRS#2 that it is there to support viable jobs.
1.11 What about those employees who were due to lose their jobs on/after 31 October 2020, should we bring them back and put them onto furlough/JRS#2?
If an employee is on the employer’s PAYE payroll before midnight on 30 October, but due to be made redundant on 31 October 2020 (of thereafter), then yes this is possible. However there are important legal as well as practical considerations with this and advice should be sought.
1.12 What about employees who have lost their jobs before 30 October 2020?
Now this is something employers are going to have to think about. In the new guidance employees that were employed and on the payroll on 23 September 2020 who were made redundant or stopped working for their employer can be re-employed and claimed for. The employer must have made a PAYE Real Time Information (RTI) submission to HMRC from 20 March 2020 to 23 September 2020, notifying a payment of earnings for those employees.
Similarly, an employee who was on a fixed term contract, on the payroll on 23 September 2020, and that contract expired after 23 September 2020, the employer can re-employ them and claim under the JRS#2, provided again that the other eligibility criteria are met.
Please note, that employers can do this, they do not have to do this. As above, there are legal and practical considerations with any decision and also ensuring that if (and it is an if) employers do decide to bring some employees back it should do so fairly and in a non-discriminatory way. Also, what should you do about payments already paid to the employee on termination – for example redundancy pay? We advise taking advice on this, particularly remembering that JRS#2 lasts (and therefore the employee would remain on the books) until 31 March 2021, accruing employment rights. Rehiring may seem like a good idea in theory but often can cause issues when the scheme ends so advice should be taken.
What about employees on (or about to go on) family leave?
Do take a look at the guidance as this explains what to do with employees returning from family leave. Just to note, if the employee is currently on maternity leave (or adoption leave/SPL), they can give 8 weeks’ notice to return to work early and be placed on furlough (if they comply).
Also, where an employee is about to go on family leave, their statutory pay should be calculated based on their pre-furlough pay.
1.13 What employees can and cannot do whilst they are on furlough leave?
The rules under JRS#2 are the same as JRS#1 so basically a furloughed employee when they are on furlough-recorded hours cannot do any work that that makes money or provides services for their employer or any organisation linked or associated with their employer. However, employees can take part in training (and would have to be paid at least the relevant national minimum wage), volunteer for another employer or organisation or work for another employer (if contractually allowed).
Furloughed PAYE Directors and owner-managers are able to perform certain statutory duties applicable to their roles(e.g. filing accounts etc.) but must not do anything which generates commercial revenue or provide a service on behalf of their businesses.
1.14 How can employers claim under JRS#2?
JRS#2 will run much the same as JRS#1 in terms of how (and when) employers can claim grants. As said, the minimum periods of furlough (or flexi furlough) is 7 consecutive calendar days and employers will need to report actual hours worked and the usual hours an employee would be expected to work in a claim period. The claim period must start and end within the same calendar month but if a pay period includes days in more than one month, each of those claims will need to be calculated separately. Claim periods cannot overlap, although an employer is allowed to make a claim in anticipation of an imminent payroll run which could be at the point they run their payroll or after they have run their payroll. There will be no gap in eligibility of support between the previously announced end-date of JRS#1 and the start of JRS#2; however, HMRC do need to update the legal terms of the new JRS scheme and update their systems, so business will need to claim in arrears for this period. Employers will be able to start their claim from 8am on Wednesday 11 November 2020 and claims made for November must be submitted to HMRC by no later than 14 December 2020.
If employers are claiming for 100 employees, there is a template which can be found here
What records need to be kept?
It is really important that – as with JRS#1 – employers maintain records of which employees are on furlough and what hours/payments are being claimed. Employers should also keep these records for 6 years (this has been changed form 5 years) – expect that HMRC will be auditing!
The guidance says records should be kept of :
the amount claimed for each employee
the claim period again for each employee
the claim reference number for your records
the calculations used
the employees’ usual hours and how these are calculated together with the hours they have worked under flexible furlough
the written furlough agreement (and any acceptance)
A lot of what we discuss is about judgements and decisions, so decisions as to whether to furlough and whom. Information about such decisions and supporting evidence may well be necessary for HMRC investigation and auditing purposes. However, such information support objective business decisions taken at the time could also be relevant if the employer is challenged for the fairness of their decisions later on by employees in an employment tribunal. Decisions are having to be made really quickly so a contemporaneous note of why a decision was objectively made, would be advisable as memories fade. . or employees you flexibly furloughed, usual hours worked including any calculations that were required.
1.15 What should employers do now?
Act quickly, be clear and communicate. Review the need to access JRS#2 either with existing furloughed workers or with those who were about to go on to the JSS or who are currently working and communicate – in writing – plans. To be eligible for the grant, employers must have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed or flexibly furloughed. The terms of any agreement must reflect the hours the employee has actually worked or not worked over the period of the agreement. A written record of the agreement should be kept for 6 years as well as keeping a record of how many hours their employees work and the number of hours they are furloughed (for example, not working), for 6 years. However, only retrospective agreements put in place up to and including 13 November 2020 may be relied on for the purposes of a JRS#2 claim so do go back and check your letters.
Read the guidance – there are a lot of key dates and these will depend on your business’ payroll date and also be aware of the proposed changes coming – whilst JRS#2 might look attractive in November, it may not be next month or into January 2021.
Keep a record of what you are claiming on behalf of your employees.
For those employers who have already issued furlough letters under JRS#2 it might be just checking they are compliant.
Whilst the employee does not have to provide a written response to the request, it would be advised to keep seeking a written agreement (an email will suffice). Remember furlough and accessing the JRS#2 is a change to one’s contractual status and pay albeit temporary.
This is a rapidly changing situation and your people will be nervous so be honest and as realistic as you can be about the way ahead, without promising too much. Keep the situation under review and also be clear that employment may end if situations change. Also, keep the messaging clear and consistent so that the business speaks with one voice.
This is (still) a marathon and not a sprint.
As with all changes since March this year, the situation is rapidly changing and we do our best to give you the information as we know it, when we know it. If you are in HR or a business owner and want to understand what the changes mean to your business then do get in touch.
Our Employment Group is working with a number of different sector clients helping them navigate the muddy waters so you are not alone. Do remember that WFH in November and the coming months is going to be different from the Summer months, so think about how you can support your leaders and workforce.
We have been working with a number of different organisations in raising mental health issues such as running stress and resilience webinars as well as focusing on remote leadership skills through our virtual Managing and Leading Remote Teams training sessions.