Furlough scheme extension: what PSC contractors need to know

After months of winding down the Coronavirus Job Retention Scheme, incrementally reducing the government’s contributions from 80% to 60%, and repeating all summer that it would come to an end on October 31st 2020, on Saturday, the government made a U-turn and announced that the CJRS would be extended until December.

But, asks Hannah Morrison, associate at law firm Brabners, is this one government U-turn that personal service company contractors might actually welcome?

JSS on the shelf

This news of further support for both employees and businesses came alongside the prime minister’s announcement that from tomorrow, Thursday November 5th, the UK will be entering into a national lockdown until Wednesday December 2nd 2020.

Among other things, and restrictions borrowed from the previous covid-19 lockdown, the shutdown means that the Job Support Scheme (JSS), previously due to replace the CJRS from November 1st, has been pushed back until the CJRS has ended.

Similar, but with important differences

It is expected (but not yet known for certain) that the rules of the extended CJRS will be similar to the rules already in place. The government has stated that it will issue further guidance ‘shortly’, although we already know that there will be some important differences.

The level of the grant will mirror the levels available under the CJRS in August, so the government will pay 80% of wages in respect of unworked hours, up to a cap of £2,500 per employee per month -- and employers will only need to pay Employer National Insurance Contributions and pension contributions on the total furlough pay.

CJRS extended: the small print

Employers remain free to top-up furloughed employees’ wages if they wish, although many will no longer be in a position to do so. When claiming the CJRS grant for furloughed hours, employers will need to report and claim for a minimum period of seven consecutive calendar days.

It appears as though the options of both full and flexible furlough are still available to employers. For ContractorUK, we previously answered a reader’s question relating to the flexible furlough scheme back in August, and it is our understanding that these flexible furlough rules will remain much the same throughout November. That means employers will pay employees as normal for any hours worked, while claiming furlough pay in respect of 80% of any unworked hours.

A boon (or two) for PSC contractors

Fortunately for the contractor sector, this may suit some PSC contractors, as it will allow them to carry out more than just their director’s duties by actually working for part of the week, and claiming 80% of salary for the rest of the week.

In this sense, the furlough scheme extension might bolster some flagging PSCs. Less fortunately however, as per previous iterations of the CJRS, it is expected that the grant will only be available for salary paid through payroll and not dividends.

As to eligibility, and further potentially helpful to contractors, it appears that employers do not need to have furloughed employees previously under the CJRS to benefit from the extended scheme in November.  

Opening the door, and there’ll be no gap

This opens the door for some businesses which have not previously taken advantage of the government’s income support from coronavirus to finally do so. However, in line with the previous CJRS requirements, employers must have a UK bank account and PAYE scheme to qualify. And to be furloughed compliantly, employees must have been on the payroll by 23:59 on October 30th 2020. If an employer (including a PSC) wishes to furlough a worker for the first time, this must be agreed in writing with the individual. Similarly, those that are already furloughed may need to agree to an extension to the agreement currently in place, depending on how that was worded.

At the time of writing (the afternoon of Tuesday November 3rd) the government is yet to confirm when claims can first be made in respect of employee wage costs during November. But it has stated that there will be no gap in eligibility for support between the previously announced end-date of the CJRS and this extension.

More of the same? The guidance will confirm

In this sense and in light of the other new important differences highlighted above, some of the sharper edges of the CJRS appear to have been softened for contractors (bar the exclusion of dividends). That said, all who wish to make use of the extended furlough scheme ought to keep a close eye out for further guidance and if the initial scheme is anything to by, there may well be reams of it. In the meantime, the CJRS extension appears to be broadly more of the same for most PSC contractors.