As we have noted previously in the series of articles on the Coronavirus Job Retention Scheme (commonly known as the furlough scheme) the Government is reducing the grants it is giving employers from September. Since August 2020 employers are required to pay employer national insurance and pension contributions.
1 September 2020 – the Government’s contributions to a furloughed employee’s usual wages will be reduced to 70% (capped at £2,187.50 a month). From this date, employers will be expected to contribute 10% (capped at £312.50) in order that the furloughed employee continues to receive 80% of their usual wages (subject to a maximum of £2,500 a month).
1 October 2020 – grants the Government makes to an employer under the furlough scheme will be further reduced to 60% of a furloughed employee’s usual wages (capped at £1,875). Again, employers will be expected to cover the 20% shortfall (capped at £625) so that the furloughed employee continues to receive 80% of their usual wages (subject to a maximum of £2,500 a month).
31 October 2020 – the furlough scheme ends. Employees can no longer be furloughed after this date.
30 November 2020 – the deadline for making claims under the furlough scheme for the period between 1 July 2020 and 31 October 2020.
When the furlough scheme ends on 31 October 2020 there is likely to be a significant impact on the employment costs of businesses. Despite requests to the contrary, at present, it does not appear that the scheme will be extended. Employers, therefore, may want to consider their position over the next few weeks and have plans in place ready for when the furlough scheme ceases to operate. If employers are considering dismissals, the scheme can also be used to fund employees’ notice pay and accrued holiday.
Job Retention Bonus
While the furlough scheme remains due to finish at the end of October 2020, businesses will be paid a one-off bonus of £1,000 for each furloughed worker they bring back to work and retain in employment until at least 31 January 2021. The bonus will apply to workers who are paid a minimum of £520 a month (£120 a week) i.e. the lower earnings limit for national insurance purposes.
More detail on how to claim under the Job Retention Bonus Scheme will be published in guidance at the end of September 2020.
Recovery of overclaimed amounts
Employers should be aware that HMRC can recover any overclaimed grants that it uncovers as a result of investigations into furlough claims made by employers and has already contacted 3,000 employers. The Finance Act 2020 gives HMRC substantial enforcement powers in relation to the furlough scheme.
HMRC has stated that it will not charge penalties in cases where an employer did not know that it overclaimed a grant at the time it was received or when a change in circumstances meant that it was no longer entitled to the grant and the repayment is made within the relevant time period.
Employers who have mistakenly received grants under the furlough scheme may also self-report in order to avoid penalties. The timeframe for self-reporting is relatively short and, as HMRC is engaged in investigating claims already, businesses are advised to carefully review their internal records to ensure that there are no discrepancies.