Phase-Out of UK Government Guidance on Coronavirus Job Retention Scheme

July 31, 2020

Update (Nov. 2): In response to the continuing COVID-19 crisis, the UK government on 31 October 2020 announced a new national lockdown for England, to run from 5 November 2020 until 2 December 2020, subject to extension. For additional details, please see our alert.

The UK government’s Coronavirus Job Retention Scheme (CJRS), announced 20 March 2020, to help businesses mitigate the impact of COVID-19 and safeguard jobs, has been revised and amended throughout the crisis. The CJRS will be phased out and will close on 31 October 2020.

After 1 July 2020, employers can elect to bring furloughed employees back to work for any amount of time while still being able to claim CJRS grant for the balance of any contracted hours which are not worked, i.e., a part-furlough, part-work structure. This is intended to allow businesses to facilitate a safe, phased return to work. (For details, see McGuireWoods’ “COVID-19 and Returning to Work: Employer Considerations.”)

The CJRS is now closed for businesses that have not already furloughed staff, with the exception that employees returning from statutory parental leave after 10 June 2020 can still be furloughed. The last date on which existing registered employers can file claims under the CJRS for any period ending on or before 30 June 2020, is 31 July 2020. Therefore, employers can only claim for those employees previously furloughed for any period of at least three weeks between 1 March and 30 June 2020. For example, if an employee was furloughed for the whole of May and brought back to work for June, they can be furloughed again up to 31 July. However, the number of employees a business can furlough after 1 July cannot exceed the number of employees furloughed in any previous claim made before 1 July 2020.

After 31 July 2020, the minimum three-week furlough period requirement will be removed and employees can then only be on furlough for a minimum period of seven days. Employers will be able to rotate employees flexibly on furlough for one-week periods. As before, businesses will need to be careful to make non-discriminatory decisions about which employees to keep furloughed and which to bring back for any period.

From 1 August 2020, employers can exercise discretion to encourage employees to return to work and employers will need to contribute a proportion of the cost toward any furloughed employees’ pay. Until 31 July 2020, the government will continue to pay 80 percent of furloughed employees’ monthly wages, up to the cap of £2,500 (CJRS cap) in the usual way, but after 1 August 2020, employers will need to pay: (1) employer National Insurance contributions (NICs); (2) pension contributions; and (3) wages for any hours the employee works.

The grant claimed through the CJRS will then be reduced from the first of each month after 31 August 2020, with a proportionate reduction in the CJRS cap, as set out in the table below.

Phase-out periods Employer liability for furloughed workers Level of grant claimed under CJRS
1 August 2020 – 31 August 2020 Employer NICs and pension contributions 80% of wages, subject to the CJRS cap
1 September 2020 – 30 September (a) 10% of wages subject to a cap of £312.50 for unworked hours; (b) Employer NICs; and (c) Pension contributions. 70% of wages, subject to a monthly cap of £2,187.50 for unworked hours
1 October 2020 – 31 October 2020 (d) 20% of wages subject to a cap of £625 for unworked hours; (e) Employer NICs; and (a) Pension contributions. 60% of wages, subject to a monthly cap of £1,875 for unworked hours

The cap for a claim under the CJRS will be proportional to the worker’s hours not worked and for which a worker is furloughed, relative to the worker’s normal working hours.

It remains to be seen, however, how the CJRS will be adapted in the event of a second or third wave of COVID-19 or whether the CJRS will be phased back in to offset longer-term economic challenges. Many employers are likely to face difficult decisions about whether contributing to a tapered furlough system will be financially viable and, as part of that risk assessment, will need to prepare a costs-benefit analysis of potential redundancies or restructuring. Employers should be aware that, from 31 July 2020, if it proves necessary to make furloughed employees redundant, statutory redundancy payments are to be based on 100 percent of their normal pay and not any reduced furlough pay received under the CJRS.

For advice on issues related to the CJRS, such as a decision-making process on bringing back employees and related return-to-work issues or on business restructuring generally, please contact Dan Peyton or Adam Penman.

McGuireWoods has published additional thought leadership analyzing how companies across industries can address crucial business and legal issues related to COVID-19.