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On 12th May the Chancellor of the Exchequer announced an extension to the Coronavirus Job Retention Scheme.
Further detail is to be provided by the end of this month. An outline of the decision announced is that whereas the scheme was due to run until the end of June, the scheme will now run until the end of October i.e. for a further 4 months. It also appears to have been left open that the scheme could be further extended beyond that point.
At present of course, where staff are on furlough leave, staff are not entitled to work whilst their employers are entitled to apply for a grant of up to 80% (or a maximum of £2,500.00 per month) of the employee’s normal salary. Following the announcement made by the Chancellor, that rule will remain in place until the end of July (thus being extended by a month).
From August onwards, employers will have the right to re-employ furloughed workers on a part-time basis; employees will still be entitled to be paid 80% of their due salary whilst on furlough leave. The new rules throw up the possibility, from August, of staff members being entitled to work part-time and to claim furlough leave salary for the remainder of their normal hours in any usual payment period.
If, as must be hoped, the economy does start to grow again then one would expect that more staff will be required to return to work, even if on a part-time basis, meaning that the overall financial impact of having to pay staff whilst on furlough leave is gradually limited. Effectively, hours become furloughed rather than entire roles for employees. Balancing the need to keep the economy moving with providing support to employers and employees probably naturally lead to the Chancellor’s announcement, and to that degree, the announcement has been widely welcomed.
There are still however grounds for caution, and it will be crucial to see the detailed guidance that eventually follows from the Government. From August, employers will be required to contribute to the sum paid to furloughed employees. Employers in some sectors may be better able to meet that obligation than others.
Exactly what the employer will be required to contribute to furlough salary is unknown. It is understood that the Government will be consulting with employers’ groups on this issue. In the 24 hours since the timing of the announcement I have seen it reported variously that: employers will be required to pay 20% of the salary to furloughed employees, the Government being responsible for the remaining 60%; the Government will be responsible for ‘the lion’s share’ of the salary payment; the Government will be responsible for ‘more than half’ of the salary payment. No doubt there will be plenty more speculation between now and the end of May.
No one should be under any illusions. August is less than 3 months away. Some employers (and their employees) will have difficult decisions to make if employers are required to commence some form of regular payment to staff, who still have no work to go to. As ever, we are here to help.