Following on from the, perhaps for some, surprising news of the extension of the Coronavirus Job Retention Scheme (CJRS) to allow for the continued use of Furlough Leave into 2021, the relevant legislation that confirms the extension of the CJRS was published yesterday evening (Friday 13 November).
As anticipated, the devil really was in the detail. Although much of the new, extended CJRS is as we anticipated it to be (as set out in our article last week, which can be reviewed here), there are a few curve balls, that could have a significant impact on businesses.
Whilst we will, of course, be assisting clients in the coming days by updating our Briefing Notes and template letters, and providing bespoke advice on how employers can make use of the CJRS to survive the ongoing economic impact of the Covid-19 pandemic, there are three key points from the publication of the law that are well worth a mention at this stage.
Firstly, there appears to be a shift away from the initially wide application of the CJRS and the use of Furlough Leave. The first Treasury Direction (which is the law used to implement the CJRS) published back in April 2020 stated that the CJRS could be used to cover “employment costs arising from the health, social, and economic emergency in the UK arising from coronavirus”.
Whilst the Treasury Direction of November 2020 also confirms this to be the purpose of the CJRS, it goes a step further, confirming that “integral to the purpose of the CJRS is that the amounts paid to an employer are only made in respect of the employee whose employment activities have been adversely affected by the coronavirus or the measures taken to prevent or limit its further transmission”. It may seem a subtle point, but on the basis that since its incarnation, the CJRS has cost the economy circa £41.4 billion, it certainly appears as though the Chancellor is trying to send an important message about the intention of the CJRS and Furlough Leave – it is for those jobs that are genuinely impacted by Covid-19.
This point is further emphasised by the limitations of using Furlough Leave during notice periods. Prior to 31 October 2020 the position on notice was clear – employers could keep employees on Furlough Leave even during their notice periods, and still claim for the Furlough Leave payments from the CJRS, even though the employment was coming to an end.
When the Government announced the extension of the CJRS on 5 November 2020, the subsequent guidance that was released confirmed an intention to review the use of the CJRS for notice periods from 1 December 2020.
The Treasury Direction published yesterday confirms that the previous position has now changed: from 1 December 2020 employers cannot make a claim under the CJRS for any period of notice from 1 December 2020 onwards. This appears to be the case even if notice was issued prior to 1 December 2020. This will likely have a significant impact on businesses who have already had to make redundancies, and were hoping for the continued support of the CJRS in respect of notice payments to their redundant employees.
Thirdly, there are much stricter time-limits for claims to the CJRS from 1 November 2020. Broadly speaking, claims for each month must be submitted within 14 days of the end of the month, with limited exceptions. This is likely to put further pressure on businesses, at an already difficult time.
One final consideration: it is worth noting that the legislation published yesterday only covers the period 1 November 2020 – 31 January 2021. Many businesses will be aware that the Government had indicated that the 80% contribution rate would be reviewed in January, and this is perhaps the biggest hint of all that the contribution rate is likely to reduce in February 2021 and March 2021, just as it did in September 2020 and October 2020.
As explained above, we will be working with clients in the coming days and weeks to help them get to grips with the new CJRS. Whether you are new to the concept of Furlough Leave, or have been using it previously and just want to understand what further support is available, our Employment Team would be happy to assist – please contact either email@example.com or call us on 01603 610911.