Furloughing agency workers post August 2020

August marks the start of the winding down of the current Coronavirus Job Retention Scheme (CJRS), which may signal the end of the furlough scheme for many agency workers.

Under the CJRS, agencies have, since March, been able to furlough temporary workers who have been instructed to cease work as a result of the coronavirus. Save for the admin involved, this has to date been at no cost to an agency, as full amounts paid out to agency workers plus associated pension and national insurance costs have been recoverable. However, from 1st August this will no longer be the case. An agency, like any other employer, will be required to meet the cost of employers national insurance and statutory pension contributions. The grant claimed under the CJRS will be limited to wages and capped at the lower of 80% of usual earnings or £2,500 per month.

In the ordinary course of a supply, pension and employers national insurance costs are accounted for in calculating rates charged to a hirer and paid to an agency worker, but for a furloughed agency worker there are no charges to a hirer. The full wage cost element of the CJRS grant must be paid out to the worker meaning that employer contributions have to be met out of an agencies own pocket.

The government estimates the cost to the employer on the average claim under the CJRS to be 5% in August, rising to 14% in September and 23% in October, as from September employers are also required to contribute to wage costs.  For many agencies, these costs will simply not be sustainable, unless agreements can be reached with hirers to meet or split costs on the grounds of the short term retention of agency staff.

The CJRS is optional, so ending participation is possible at any time, albeit it is important to consider the terms agreed with the workers in case any notice requirements were included, and in any event to give the individual time to consider alternative work.  Agencies may therefore now want to consider their position in respect of furloughed workers from 1st August onwards.

The Lawspeed Covid Team can assist with queries regarding, contractual terms, ending or extending furlough and any disputes that may arise as a result. Contact us on 01273 236 236 or info@lawspeed.com