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Flexible furlough – how it works in practice

Following the Chancellor’s announcement on 29 May 2020 regarding further changes to the Coronavirus Job Retention Scheme, we now have more detailed guidance about how the new flexibility under the scheme will work from 1 July.

Coronavirus Job Retention Scheme (CJRS)

  • Flexibility

As we know, from 1 July 2020, employers will be able to bring furloughed workers back to work on a part time basis if appropriate while still being able to claim under the CJRS for hours not worked. However, this is only possible in respect of those workers whom the employer has successfully claimed for under the CJRS previously, that is, those workers who have been furloughed for at least three consecutive weeks at any time between 1 March and 30 June 2020.

Workers will be able to work as much or as little as the business needs, with no minimum time during which they must be on furlough for their employer to claim under the CJRS. However, claims under the CJRS must be for a minimum of seven calendar days. Workers can also enter into a flexible furlough agreement more than once.

That said, if workers are unable to return to work or employers do not have work for them to do, they can remain on furlough and the employer can continue to claim the grant (on a tapered basis-see below) for their full hours under the existing rules.

Businesses need to agree with workers (either directly or via a collective agreement with a trade union) the hours and shift patterns on which they will return to work and the arrangement will need to be set out in a new written agreement between the employer and worker. Employers will need to keep a copy of this written agreement, together with all other records relating to the furlough claim and how it has been calculated, for six years.

Where a worker is flexibly furloughed, the employer will need to work out the worker’s usual working hours, record the actual hours they work and the remaining furloughed hours for each claim period. The guidance sets out different calculation methods depending on whether the individual has fixed or variable hours.

Employers will be responsible for paying workers’ wages in full while they are in work (including paying the tax and employer National Insurance Contributions (NICs) due on those amounts). Employers can still receive a grant under the CJRS for any of the worker’s normal hours not worked because they are on furlough.

Where a previously furloughed employee starts a new furlough period before 1 July, this furlough period must last for a minimum of 3 weeks even if this means it will end after 1 July. So, for employers that have a rotational furlough system in place, if one group is furloughed on, say 22 June, that group would have to stay fully furloughed until 12 July before they can then be put onto a flexible furlough arrangement.

  • Level of government support

From 1 August, the level of government grant provided through the CJRS will be slowly tapered, with employers being required to contribute towards furlough pay.

Any individuals who are furloughed continue to receive 80% of their wages up to £2,500 during the time they are on furlough. However, from 1 August, whilst the government will continue to contribute 80% of wages up to a cap of £2,500 per month, employers will start to pay the employer NICs and pensions contributions on the furlough pay. It is important to note that the wage cap is proportional to the hours not worked. For example, an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.

From 1 September, the government’s contribution will reduce to 70% of wages up to a cap of £2,187.50 per month. Employers will, for the first time, have to pay the additional 10% along with the employer NICs and pension contributions.

From 1 October, the government’s contribution will reduce to 60% of wages up to a cap of £1,875 with employers paying the additional 20% along with the employer NICs and pension contributions.

The scheme is set to close in its entirety on 31 October 2020 and there has been no suggestion that it will be extended for any sectors that have been particularly badly hit, such as the hospitality industry.

  • How to claim

Employers will have until 31 July to make any claims in respect of the period on or before 30 June. Therefore, claims for furlough pay up to 30 June must be made separately to claims for furlough pay from 1 July, even where a worker furloughed in June continues to be furloughed full time in July.

Employers will only be able to make claims under the CJRS for days in July after 1 July 2020 not before. Claims starting on or after 1 July must start and end within the same calendar month. This is because the scheme rules will change each month from 1 July onwards (because of the changing levels of employer contribution), hence claims under the CJRS cannot overlap different calendar months.

Employers can still only make one claim for any period so need to include all furloughed workers in the claim even if they are paid at different times.

The number of workers an employer can claim for in any single claim from 1 July cannot exceed the maximum number of workers the employer has claimed for up to 30 June. For example, if an employer put in respective monthly claims for 30, 20 and 50 workers, the maximum they could claim for after 1 July is 50 workers (subject to the exception for employees returning from parental leave who are furloughed for the first time after 10 June due to them returning from parental leave – in this case they can be added to the maximum number an employer can claim for). This means that employers who are operating rotating furloughs will not be able to put all previously furloughed employees on flexible furlough at the same time.

When claiming the grant for furloughed hours under the CJRS, employers will need to report and claim for a minimum period of a week for grants to be calculated accurately across working patterns (although employers can choose to make claims for longer periods such as on monthly or two weekly cycles if preferred).

Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and the actual hours worked.

If an employer makes an error in a claim resulting in overpayment, they must pay this back to HMRC. Employers can tell HMRC about any overclaimed amount as part of their next claim (and should keep a record of the adjustment for six years). HMRC are looking at a process for paying back overpayments where no future claim is to be made. If there was an underpayment, the employer has to contact HMRC to amend the claim and HMRC will undertake additional checks.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

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