New guidance on the extended CJRS: Six considerations for employers in accessing the scheme

The government has now published further guidance on how the Coronavirus Job Retention Scheme (CJRS) will operate from 1 November 2020. This follows its earlier announcement that the CJRS would be extended until 31 March 2021 and the Job Support Scheme (JSS) postponed, and the publication of a policy paper. As before, the guidance links through to other updated guidance covering different aspects of the scheme.

While the guidance indicates that the extended CJRS will operate in much the same way as the CJRS has operated to date, we set out below six specific points for employers to consider in utilising the scheme:

"Unable to maintain your workforce due to Covid-19"

The updated guidance refers to the CJRS being available to those organisations who "cannot maintain your workforce because your operations have been affected by coronavirus (COVID-19)".  This is a condition that has been carried over from the original conditions and the guidance does not revert to the original wording we saw when the CJRS was first launched that an employer is "severely affected". Nevertheless, there remains a real difficulty for an employer in deciding whether it is eligible to claim. There is no suggestion that we will see a financial impact test being introduced for large employers as was set out in the JSS.

We do know that there is no requirement for an employer to have previously accessed the CJRS to potentially claim grants from 1 November (or for grants to have been claimed previously in respect of an employee – they must simply be on payroll at the relevant date). However, as before, care must be taken in accessing the scheme and how funds are used, with any decision carefully documented and regularly reviewed in light of the business operations at the relevant time.

Employer contributions

The CJRS will be reviewed in January 2021 and employers may be required to make contributions.

As we knew, the guidance confirms that the extended CJRS only requires employers to pay national insurance and pension contributions in respect of an employee's unworked hours; the government will pay 80% of wages for unworked hours up to a cap and it is for an employer to decide whether it wishes to provide any "top up".

However, employers must factor in that there is a real likelihood that they will be required to contribute more towards an employee's unworked hours in the final months of the scheme following a promised government review, perhaps reflecting the position we saw in September and October where the government contributions towards wages for unworked hours reduced to 70% and 60% and the employer contributions increased to 10% and 20% respectively.

Employee notice pay

There may be changes on 1 December to whether employers can claim for employees serving contractual or statutory notice periods.

The updated guidance seemingly reflects the existing position on using CJRS funds to pay an employee's notice pay. However, perhaps with a nod towards the restrictions which were set to be imposed under the JSS on claiming JSS funds during notice periods, the guidance expressly states that the government "is reviewing whether employers should be eligible to claim for employees serving contractual or statutory notice periods starting on or after 1 December 2020, with further guidance published in late November".

Over recent days the media has drawn attention to the situation of many former employees who were recently made redundant in anticipation of the CJRS closing. The CJRS does allow employers, if they wish, to re-engage such employees and claim for them under the CJRS (subject to a PAYE RTI submission being made on or before 23 September 2020). However, potential changes to the use of CJRS funds (as well as the prospect of increased contributions and other associated employment costs, such as accrued holiday) means that such re-employment may well be unfeasible from a costs perspective unless the role is viable longer term.

Claimants will be named

In a departure from the original scheme, corporate and LLP employers who claim CJRS from December will be named by HMRC. Those familiar with tax world will know that there are a number of circumstances when taxpayers can be named and shamed: for example, serial defaulters and those who breach National Minimum Wage provisions.

This appears to be a new policy of naming businesses that have not done anything wrong. Its purpose is not clear. It might provide useful transparency to identify fraud but there are concerns that it might discourage legitimate businesses from claiming support.

Continuing HMRC scrutiny

Businesses claiming under the CJRS must consider carefully whether to claim and for how much ensuring they meet all relevant eligibility criteria, and keeping the evidence to show that is the case. It is clear that HMRC scrutiny will be ongoing with a real prospect of grants being clawed back and the potential for interest and penalties to be issued.

Indeed, having put the figure of £3.5bn on the amount of original CJRS claims wrongfully made through error or fraud, HMRC is now following up on the 30,000 nudge letters sent to employers who used the original CJRS scheme and where there has been no response from the business or the response is seen as inadequate. If you do receive one of these letters it will be important to respond carefully as HMRC are using their normal tax investigation and enforcement powers which are very extensive so an accurate response from the outset will be key.

It is also clear that HMRC's current campaign of investigating the original CJRS claims is creating uncertainty and perhaps discouraging employers from making claims under the new CJRS.

Records and processes for claiming

As before, employers must discuss any arrangements with their staff, make any changes to the employment contract by agreement and confirm this in writing.  Unlike when flexible furlough was first introduced, there is now no restriction on numbers of employees who can be claimed for. However, the same restrictions on employee activities apply as previously (only training, volunteering or permitted work for an unrelated employer is permitted) and it will be important to ensure these are clearly understood by employees and their managers to avoid any CJRS funds being inadvertently jeopardised. Helpfully, the guidance confirms that provided an agreement meeting the requisite conditions is made with an employee by 13 November 2020 it can have retrospective effect from 1 November 2020.

Record keeping continues to be key. Businesses need to keep contemporaneous records as to why they meet all the criteria, including how they have been impacted by the crisis. The written record of agreement with the employee must be kept for five years and records kept of how many hours the employee is working and how many they are on furlough for.

When making a claim, employers should note the shorter claim window that now applies. Claims relating to November 2020 will have to be made by 14 December 2020 and claims relating to subsequent months will need to be submitted by the 14^th day of the following month.

Next steps

At a time when employers are working hard to kickstart their businesses and retain their skilled staff, it is disappointing that the government has already indicated that the goalposts may well be shifting again from 1 December and potentially again in the New Year. Employers will need to now give careful and immediate consideration as to whether or to claim CJRS funds and, the impact on any re-engagement of dismissed staff and any ongoing redundancy programme.