Time Critical Changes to the Coronavirus Job Retention Scheme (CJRS)
On 29 May the Chancellor announced that from 1 July employees can return to work part time and the employer can continue to claim the CJRS grant for hours not worked. This is a major change to the scheme which previously did not allow employees to do any work at all while on furlough.
CJRS will be closed to new employees from 1 July which means employees must be furloughed by 10 June if they are to qualify.
From 1 August there will be a gradual reduction in the amount that employers can claim, currently 80% of wages up to a cap of £2,500, with the scheme ceasing altogether on 31 October.
- From 1 August employers will have to pay the Employers NIC and pension contributions.
- From 1 September CJRS will fund 70% of wages only, up to a cap of £2,187.50 (reduced in proportion to hours not worked). Employers must top up the wages by 10% to maintain the 80% total payable to the employee.
- From 1 October CJRS will fund 60% of wages only, up to a cap of £1,875 (reduced in proportion to hours not worked). Employers must top up the payment by 20%
Employers will have to assess how long they are prepared to keep furloughed staff on the payroll, given that they will be bearing part of the employment costs while they are not working. It may be worth the expense of paying those costs to retain staff where there is an expectation that they will eventually return to work full time again. However if there is no realistic prospect of that, this may be the time to consider redundancies and the alternative options. Consideration needs to be given to the costs of redundancy as well as the additional cost of recruitment of new staff at a later stage when the business does restart, so redundancy is often not an attractive option. It will be important to produce a cashflow forecast to assist with this decision.
Existing employment rights are unaffected by the CJRS so staff on furlough are entitled to a fair process and a statutory notice period during which they must be paid in accordance with their contract of employment. The notice period can be up to 12 weeks. We advise taking proper professional advice from an employment specialist if you intend making redundancies.