Coronavirus Job Retention Scheme – Flexible furlough updates
The government has published further updates to the Coronavirus Job Retention Scheme earlier this month. The new changes include the introduction of a flexible furlough option for workers, as well as outlining how the scheme will continue to operate over the next few months.
The new announcements provide further information on the future of the government’s scheme, introduced as part of the UK’s response to the ongoing Covid-19 crisis.
Find out more about the previous iteration of the Coronavirus Job Retention Scheme here.
Latest updates to the UK Coronavirus Job Retention Scheme
The government’s new updates include:
- From 1 July, employers can bring furloughed employees back to work part-time, while still being able to claim the CJRS grant for the hours not worked (compared to the hours they would normally have worked in that period).
- Staff can only be flexibly furloughed if they have previously been furloughed for at least one consecutive three-week block before 30 June 2020.
- Any new period of furlough started before 1 July must be completed for the full three weeks before that employee can move on to flexible furlough.
- Flexible furlough can last any amount of time.
- New flexible furlough agreements will be required.
- Employers must keep records of how many hours their employees usually work, actually work and the number of hours they are furloughed.
- From 1 August employers must contribute towards the 80% of wages figure for their furloughed employees up to the capped £2,500.
What are the rules around who can be put on flexible furlough?
Employers can no longer furlough employees who haven’t been on the scheme before. Flexible furlough will only apply to staff who’ve been placed on furlough for at least three consecutive weeks prior to the end of June.
The maximum number of staff an employer can claim furlough for in any single claim period starting from 1 July cannot exceed the maximum number of employees they claimed for under any claim ending by 30 June.
For example, if an employer has claimed for 20 employees in April, 50 employees in May and 10 employees in June, the employer cannot claim for more than 50 employees after 1 July 2020. Family leave returners can be added to this maximum.
How long does an employee need to be placed on flexible furlough?
Employees need to have completed at least three weeks of furlough prior to the end of June before they can be placed on the new flexible furlough scheme.
From July 1, eligible employees can claim after seven calendar days, dropping from the previous minimum time period of three consecutive weeks.
Is the financial support changing?
Under the new scheme, until 31 October, employees will continue to receive 80% of their wages up to a cap of £2,500 for the hours they are on furlough, however, employers will have to start contributing to the cost.
For June and July, the government will pay 80% of wages up to a cap of £2,500, as well as employer National Insurance Contributions (ER NICS) and pension contributions for the hours the employee is on furlough. Employers will have to pay employees for the hours they work.
From August, the government will continue to pay the 80% capped wages, but employers will be responsible for covering the costs of ER NICs and pension contributions.
Into September, government contributions will drop to 70% of total wages for furloughed employees, capped at £2.187.50. Employers will continue to be responsible for pensions and ER NICs contributions, as well as topping up the remainder of the employees’ wages up to 80%.
Government payments will reduce further in October, down to 60% of wages, capped at £1,875, with employers responsible for covering the remainder.
Here is a helpful summary table:
Employer NICs and pension contributions1
|Government contribution: wages||80% up to £2,500||80% up to £2,500||70% up to £2,187.50||60% up to £1,875|
|Employer contribution: employer NICs and pension contributions2||No||Yes||Yes||Yes|
|Employer contribution: wages||–||–||10% up to £312.50||20% up to £265|
|Employee receives||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month||80% up to £2,500 per month|
1,2 Government contribution covers employer NICs and pension contributions (up to an amount equivalent to the minimum automatic enrolment employer pension contribution) calculated on 80% of wages up to £2,500 a month.
How will flexible furlough work?
It will be possible for employees to work for some days or half days and be furloughed for the remainder of the week. The cap on the furlough grant will be proportional to the hours the employee does not work.
For example, if a furloughed employee is asked to return to work two days a week, the employer will pay for those two days in full as usual, whilst continuing to claim 80% (in July and August, reducing in September and October) of the furloughed employees wages through the scheme for the three days that the employee is not working for the employer.
Staff are still able to be on full furlough if there is no work for them to do. It is still up to the employer whether they top up the 80% or not, but they will have to pay in full for the hours the employee actually works.
The flexible furlough scheme allows for new working patterns to be adopted, with no restrictions on the length of time it must last.
In order to agree such an arrangement, the employer and employee must enter into a flexible furlough agreement. It should be noted that the rules about what an employee is and is not permitted to do during the time that they are furloughed remain the same.
If an employer is adopting a flexible furlough arrangement, they must ensure that they continue to keep records and retain them for six years. Employers must keep a record of how many hours their employees work and the number of hours they are furloughed (i.e. not working) as against their usual hours worked.
An employer does not have to adopt flexible furloughing, and full furlough will remain available until 31 October 2020, with the employer having to meet the required additional financial contributions.
How will employers calculate usual working hours?
When claiming for employees who are flexibly furloughed employers should not claim until they are sure of the exact number of hours they will have worked during the claim period. If employers claim in advance and an employee works for more hours than are included in the claim, then the employer will have to pay some of the grant back to HMRC.
There are two different calculations employers can use to work out an employee’s usual hours.
- Fixed – employers must look at the last pay period before 19 March and calculate any time taken for annual leave, sick leave or family leave as if it wasn’t taken.
- Variable – employers should look at the average number of hours worked over the past tax year or the corresponding calendar period – claiming for the hours on the higher total.
Are there changes to the minimum length an employee can be furloughed for?
Yes. There have been changes to the minimum length of furlough and the way that the claim periods are calculated. These are some of the most significant changes that have been introduced under the new guidance.
- The claim period is the number of days for which an employer is claiming a grant, not necessarily the same as the employee’s furlough period.
- There is no longer a minimum three-week period for furlough claims. From July, employees can be placed on furlough for any set period of time, providing they are eligible.
- The minimum claim period is now seven calendar days, unless it is the first or last day of the month and the employer is claiming for the previous period.
- Claims for any periods starting before 1 July must end on or before 30 June. Claims for periods ending on or before 30 June 2020 must be made by 31 July 2020.
- From July onwards, claims should be matched to the dates an employer processes their payroll.
- Claims cannot cross calendar months from July, as the payment details are changing for each period over the summer months. Claims that span multiple months must be submitted as separate month-by-month claims.
What if my employer cannot afford to pay my wages?
Employer contributions are mandatory from 1 August 2020. If an employer cannot afford contributions, then they will not be able to continue to place their staff on furlough and benefit from the scheme. At this point employers will have to consider other options such as agreeing new terms and conditions (reduced hours/pay) or redundancies.
Guidance for employees being put at risk of redundancy can be found here
Is a written agreement needed?
The guidance states that a new written agreement is required to confirm a new flexible furlough arrangement.
We are facing unprecedented times and the government’s guidance is constantly being updated so it is therefore paramount that you keep up to date with the latest updates. This note gives general guidance and an overview only and is not intended to be legal advice.