Empowering the Freelance Economy

CJRS extended: what does this mean for employers, agencies and umbrella contractors?

The Coronavirus Job Retention Scheme (CJRS) which was due to end on 31 October 2020 has now been extended into December to tie in with the Prime Minister’s latest announcement on a new national lockdown (which will start on Thursday 5 November and last until at least Wednesday 2 December – subject to Parliament’s approval). The Job Support Scheme (Open and Closed) which was due to come into force on 1 November 2020 has been postponed until the end of the extended CJRS.

What we know about the extension

According to Osborne Clarke Insights, some detail is set out in the government’s latest statement and indications are that the extended CJRS will operate in much the same way as it has done to date (as of 2 November 2020). However, for the purposes of the extension:

  • There is no requirement for an employer or employee to have previously used the CJRS.
  • To be eligible, employees must be on an employer’s PAYE payroll by 23:59 on 30 October 2020; a Real Time Information (RTI) submission notifying payment for that employee to HMRC must have been made by that date.
  • Both full-time and flexible furloughing is permitted. Employers will be able to agree any working arrangements with employees, with the employer paying for working hours as usual and a grant under the CJRS potentially available for hours not worked. Employers will need to report and claim for a minimum period of seven consecutive calendar days.
  • Under the extended CJRS, the government will pay 80% of eligible wages for unworked hours, up to a cap of £2,500. However, employers will continue to pay employer National Insurance Contributions (NICs) and pension contributions on these unworked hours. This mirrors how the CJRS operated in August.
  • Employers are able to top up an employee’s wages above the scheme grant at their own expense if they wish.

To claim or not to claim?

“Clearly, many employers and employees will need to revisit the arrangements currently in place and consider carefully whether support should be claimed under the extended CJRS,” according to Osborne Clarke. 

Additional guidance is due to be published and, while it is not expected that the extended CJRS will provide for the financial impact test and other restrictions which were being introduced under the JSS, businesses looking to claim government funds under the CJRS must ensure that they meet all relevant eligibility criteria and carefully consider what funding is appropriate to claim given continuing HMRC scrutiny and the impact on brand, the law firm warns.

“Given the changing situation, clear communication on working arrangements and financial terms with employees will be critical.  Employers must also remain alert to the difficulties employees may be facing individually, both in and outside of work, particularly with a new lockdown looming. It is also important to ensure that managers are actively supporting employee wellbeing at this uncertain time,” said the Osborne Clarke Insights report.

Employee and contractor welfare

The Freelance Informer reported on spotting the signs of grief in employees and contract workers and provided guidance on how workers can overcome related career barriers that can ensue as a result.

“When people lose their sense of identity or purpose, when they feel they’re losing control or their connection to the things that are important to them, they experience grief,” according to a McKinsey Quarterly report.

“For leaders, such grief may make it hard to be at their best at a moment that unquestionably demands it. They may have difficulty bonding with others. Managers and employees outside the C-suite are also dealing with all manner of loss: a missed promotion, loss of a key customer or client, end of a project, disbanding of a team, retirement of a beloved colleague without in-person celebration. These can all spark feelings of grief that include shock, anger, sadness, and fear,” said the report.

Can umbrella workers be furloughed?

Yes, they should qualify if they were on the payroll as at 19th March. However, some unregulated umbrella companies and any that wrote in discretionary payments into the contracts of their contractors, are likely to fall through the cracks.

The FCSA (with support from some other trade organisations) has lobbied the Treasury hard to make a concession for umbrella workers under the furlough rules to allow ‘discretionary payment’ written into contractor contracts to count as regular wages.

“Their members are certainly right to ask for this,” according to Adrian Marlowe, MD of recruitment and staff/contractor engagement law firm, Lawspeed, “given the distress caused to their umbrella workers, but is the problem of their own creation?”

Can contractors be fairly paid based on their actual regular wage in the same way as PAYE agency workers?

“Save for those on umbrella employment contracts that do not use the fiction of ‘discretion’, the answer is ‘not for now’,” according to Marlowe.  According to the recruitment legal expert, umbrella agency workers that signed up to contracts that include this “fatal ‘discretionary’ element” could only have expected to be furloughed with payment based on NMW calculations, that is unless the Treasury changes the rules to accommodate the requested concession.

Design flaw or get out clause?

“The current CJRS scheme was not designed with umbrella companies in mind, and is particularly complex for umbrella employers who are not directly involved in deciding who will work and for how long,” states Orange Genie, an Umbrella and contractor financial services company, on its website. “The changes relating to part-time working will only add to those complexities, and your umbrella company is unlikely to be comfortable administering the CJRS under those circumstances,” said Orange Genie, which joined the FCSA in 2012.

According to Orange Genie, the changes that were announced back in August would vastly increase the cost to employers, and as a result the umbrella company decided “to close” their furlough scheme from the 31st of July. While payments were made in August for the period ending 31st July 2020, no payments would be made for any period after this date.

“Orange Genie Employees should be aware that we have decided not to furlough our employees on a part-time basis from July, in order to ensure that we remain in control of the process of paying and claiming correctly in line with CJRS guidance,” the company stated on its website.

“Agencies and hirers, realising that umbrella companies are in this predicament, are unfortunately too late to do anything about it except review their relationship with umbrella companies to ensure that going forwards any element of ‘discretion’ on paying the worker is totally ruled out. They will in the meantime have to bear the brunt of their umbrella workers frustration, through little fault of their own,” states Marlowe.

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