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Furlough Extension – more support for businesses announced 5 November 2020

On 5 November 2020, the Chancellor, Rishi Sunak, announced that the Coronavirus Job Retention Scheme (also known as the furlough scheme) will remain open until 31 March 2021. For claim periods running to January 2021, employees will receive 80% of their usual salary for hours not worked, up to a maximum of £2,500 per month, hence the scheme is more generous than the scheme running in September and October. The percentage may be reviewed for February and March.

Full guidance is due to be published next week, on 10 November 2020. From the HMRC Policy Paper, here is a summary of what we know so far:

  • employers can claim even if they, or the relevant employees, had not previously used the CJRS.
  • the furlough will continue to be flexible, i.e. employees can continue to do some work.
  • employees who have previously been furloughed continue to have their reference pay and hours based on the existing furlough calculations (as under the old scheme). Employees who have not previously been furloughed will have a different pay/hours reference period. Full guidance will be provided on 10 November, but broadly the pay is based on 80% of the wages payable in the last pay period ending on or before 30 October 2020 (for those on fixed wages), or 80% of the average payable between the start date of their employment or 6 April 2020 (whichever is later) and the day before their CJRS extension furlough periods begins (for those on variable wages).
  • employees can be furloughed if they are shielding in line with public health guidance (or need to stay at home with someone who is shielding). That does not, of course, mean they have to be furloughed.
  • employees that were employed and on the payroll on 23 September 2020 who were made redundant or stopped working for their employer after that date can be re-employed and claimed for.
  • the Job Support Scheme and the Job Retention Bonus have been put on hold (for now).

This news will come as a major relief to the UK’s employers, and the extension of the scheme until at least March shows a welcome long-term commitment to supporting businesses through this phase of the crisis. It will give business leaders the financial assurance and time they need to plan and weigh up their options as they look beyond this lockdown with a view to reopening, in some capacity, for the festive period. As a result of the announcement, the planned Job Support Scheme will essentially be replaced by the extended furlough scheme for the time being.

Now that businesses have this commitment from the Chancellor, a period of stability is sorely needed. UK companies have been through a turbulent period and government support has at times been changed at the last minute and announced without sufficient information for businesses. We need to see a Treasury Direction – ideally this week – to enshrine the new plan and give employers the information they need. From here, businesses should have a solid foothold to firm up their plans for the remainder of the year and looking ahead to 2021.

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