July 2020 – Furlough and Kickstart Schemes Update

Following the introduction of ‘flexible furloughing’, the Government has published a third Treasury Direction (the “Direction”) concerning the Coronavirus Job Retention Scheme (the “Scheme”). Before providing more detail on the Direction, here is a brief reminder of how the Scheme will operate from 1 July 2020:

• Throughout July, the Scheme will remain unchanged.
• From 1 August, the Government will continue to pay 80% of wages up to a cap of £2,500, but employers will be required to pay the employer national insurance contributions and pension contributions.
• From 1 September, the Government contribution will drop to 70% of wages (up to a cap of £2,187.50) and employers will be required to pay 10% of wages to make the total up to 80% (plus employer national insurance contributions and pension contributions).
• In October, the government contribution will be reduced to 60%. Employers will be required to pay 20% of wages to make the total up to 80% (plus employer national insurance contributions and pension contributions). The Government contribution in all scenarios will be proportional to the hours not worked.

Turning now to ‘flexible furloughing’, it operates so as to allow employers to agree to part time working arrangements with previously furloughed employees, whilst still being able to claim Government monies under the Scheme (for the hours not worked). For further details on flexible furloughing, including the current rates and caps, see here.

On the whole, the third Treasury Direction makes relatively minor amendments to the claims process before 1 July 2020. It confirms that:

• the final claim made under the “original” furlough scheme (i.e. before flexible furloughing began on 1 July 2020) cannot go beyond 30 June 2020.
• Furlough can continue under the new arrangements from 1 July. There is a requirement for the employer and employee to reach agreement on flexible furlough arrangements and for that agreement to be made in and/or confirmed in writing and retained until at least 30 June 2025 (for auditing purposes).

A new paragraph in the latest Direction caused some concern to employers and brought with it media headlines claiming that employers may not be able to claim furlough monies from the Government for notice periods (i.e. where furloughed employees are being made redundant). That would be a U-turn on previous Government policy statements which confirmed furlough pay can be used during notice periods.

However, it is now considered that this paragraph is simply confirming that money claimed under the furlough scheme must be used to continue to pay employees (i.e. it can’t be used to make a payment in lieu of notice). During a notice period, the employees are continuing to be employed, therefore, an employer can pay notice using monies reclaimed under the Scheme.

A number of lawyers and law-firms have spoken with HMRC and BEIS who have informally confirmed that there is no intention to prevent employers claiming furlough pay for employees working their notice.

While we cannot provide a cast-iron guarantee, we suspect formal clarification will be provided over the next few days.

Rishi Sunak’s Summer Statement

For those of you who haven’t seen Rishi Sunak’s latest announcement, a ‘Job Retention Bonus’ will be introduced following the end of the Coronavirus Job retention Scheme. Businesses will be paid £1,000 per employee that returns from furlough and is kept employed until January 2021. The employees will need to earn on average at least £520 per month between November 2020 and January 2021. Employers will be able to claim the bonus from February 2021 once accurate RTI data to 31 January has been received. More information about this scheme will be available by 31 July and full guidance will be published in the Autumn.

In addition, the Government has also set out plans for a “Kickstart” Job Creation Scheme. This scheme is aimed at young people between the ages of 18 -24. As part of this scheme for every new job which is created (and this must be an additional job) the Government will pay the employer the National Minimum Wage for that employee up to 25 hours per week (employers will be able to top up the hours to full time without the Government funding being effected). We understand that there will be no cap on the number of places available, the only caveat being that the role must be a new role which has been created – as yet, we do not have the details of how that will be policed.

Finally, the Government has also committed to providing funding for the hiring of apprentices. For a period of 6 months employers will be provided with a payment of £2,000 for each apprentice they take on (£1,500 for apprentices aged over 25).

Should you have any queries regarding any of the points above, please feel free to contact us.