The JRS will now run until 31 October 2020, but some aspects will change from August. Updated guidance clarifies certain matters, including when overtime payments should be included in JRS reference pay.
The Job Retention Scheme (JRS), expected to end on 30 June 2020, will now continue until the end of October 2020. The scheme will operate on its current basis until the end of July, but from August employees who are ‘currently’ furloughed when the March to July period comes to an end, will be able to work part-time for their employers. Whilst additional guidance is awaited, it appears that employees can only be furloughed over August to October if they are already on furlough at the end of July. This would be an important restriction on accessing the new version of the scheme. Additionally, after 1 August, employers will be required to meet part of the employment costs of their furloughed workers. Details on this new version of the scheme are expected before the end of May. HMRC also updated their JRS guidance on 14 May. Changes include clarification of when overtime payments should be included in the calculation of furloughed workers’ reference pay, and confirmation that employers must retain the relevant records for six years, not five. This article sets out what employers need to know in order to consider how changes to the JRS could impact their business, and whether their current claims have been prepared on a sustainable basis.
The Chancellor’s announcement
In a welcome move, the Chancellor announced on 12 May 2020 that the JRS, which was due to end on 30 June 2020, will now run to 31 October 2020.
This means that businesses whose operations have been severely affected by the COVID-19 outbreak can continue to furlough workers over this extended period.
The JRS will continue to operate as it currently does until 31 July 2020, and in particular:
However, from 1 August 2020, employees who are ‘currently’ furloughed when the March to July period comes to an end will be permitted to return to work for their employers on a part time basis. Whilst further guidance is awaited, this apparent need to be on furlough at the end of July in order to be furloughed over August to October is an important restriction on accessing the more flexible version of the scheme.
From 1 August, participating employers will also be required to meet part of their furloughed workers’ minimum salary payments (which are equal to 80 percent of their reference pay or, if lower, £2,500 per month – the employer can choose to ‘top up’ this minimum payment but is not obliged to do so).
Details of these changes, such as the portion of the minimum salary payment to be borne by the employer, and whether this will be linked to employees who return to work part time, or be a free standing requirement, will be published by the UK Government before the end of May.
Updates to HMRC’s guidance
HMRC also published several updates to their JRS guidance on 14 May 2020.
This last point is an important clarification, as previously it was uncertain what constituted ‘non-discretionary overtime’, which should be included when calculating furloughed workers’ minimum salary payments and the associated JRS grants. HMRC’s guidance now confirms that, in line with KPMG’s understanding, overtime payments can be included where the employer was contractually obliged to pay the employee at a set and defined rate for the overtime worked (rather than where the employer was contractually obliged to offer the overtime).
The updated guidance also confirms that other contractually enforceable variable payments (e.g. shift allowances) should be included in reference pay.
The treatment of overtime, allowances and similar payments requires careful consideration, and employers should assess the basis on which they calculate their JRS claims in light of this updated guidance. Employers should also consider whether any amendments to past claims might be required once HMRC have introduced this functionality into their JRS portal.
What should employers do?
Extension of the JRS is clearly welcome, and employers will urgently need to consider how the support available affects decisions in relation to managing its workforce.
In particular, if it is indeed the case that employees can only be furloughed over August to October if they were on furlough at the end of July, employers will need to assess the extent to which they might require support from the JRS over the coming five to six months, and plan which employees to furlough – and when – accordingly. This work will need to be undertaken in the coming weeks in order to put plans into action in when the new scheme rules come into force.
Other practical steps that employers who do or might participate in the JRS can take now include:
© 2021 KPMG LLP a UK limited liability partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
For more detail about the structure of the KPMG global organisation please visit https://home.kpmg/governance.