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Flexible furlough

By Mini Setty

Jun 16th, 2020

Flexible furlough - what do you do now?

On 12 June, the Government published updated guidance on the Coronavirus Job Retention Scheme (CJRS). The guidance sets out a complex mechanism under which employers can flexibly furlough their staff from 1 July 2020.

 
Who qualifies for flexible furlough?

 
Any employee who has undertaken a furlough ‘cycle’ of three continuous weeks between 1 March and 30 June can be part of the flexible furlough scheme.  If an employee has not been furloughed before then they cannot be furloughed, unless they have been on family leave (maternity, paternity, shared parental leave etc) and they can be furloughed on their return.

 
How many people can you claim for?

 
From 1 July, the number of employees included in a claim cannot exceed the highest number of employees included in a claim submitted previously. 


For example, an employer that claimed for 25 employees in April, 45 in May and 55 in June will not be able to claim for more than 55 employees in any claim after 1 July.  

 
What will the CJRS cover and from when?

 
From 1 July – HMRC will pay the employer a grant equal to: 80 percent of the furloughed employee’s pay (capped at £2,500 per month), and the associated employer’s NICs and minimum automatic employer pension contributions. 


From 1 August - HMRC will pay the employer a grant equal to: 80 percent of the furloughed employee’s pay (capped at £2,500 per month). Employers will be required to meet the cost of employer’s NICs and pension contributions.


From 1 September - HMRC will pay the employer a grant equal to: 70 percent of the furloughed employee’s pay (capped at £2,187.50 per month).  Employers will be required to meet the cost of employer’s NICs and pension contributions.


From 1 October - HMRC will pay the employer a grant equal to: 60 percent of the furloughed employee’s pay (capped at £1,875 per month).  Employers will be required to meet the cost of employer’s NICs and pension contributions.


The furlough scheme will end on 31 October 2020.

 
Claim periods

 
Any furlough claim before 30 June must be made by 31 July 2020.


After 1 July, employers cannot make claims that cross calendar months, a claim must start and end within the same calendar month. 


It is possible to make more than one claim in each month, but each claim must be for a period of at least seven calendar days. 


The only exception to the seven-day claim is if you are making a claim for a few days at the beginning or end of a month (e.g. if you pay weekly and the month end results in a week being split across two months). There, you will need to make two claims (one for each month).

 
How will flexible furloughing work?

 
From 1 July, employees can work for their employers for some days (or part days) and be furloughed for others. For example, an employee could work on Monday and Tuesday and be furloughed on Wednesday, Thursday and Friday.  Any working pattern is permitted. 


The rules about what an employee is (and is not) permitted to do when furloughed still apply to the days that they are furloughed.


Where flexible furlough is being used, there are additional record keeping requirements and employers are required to retain (for six years) records of the usual hours worked by each employee (including details of the calculation used to ascertain usual hours) and the actual hours worked.

 
Written agreement?

 
The guidance states that you need a “new written agreement” to confirm the new furlough arrangement.  It is assumed that one overarching agreement would be sufficient as in the case of being placed on full furlough.

 
Calculating the furlough grant if an employee is flexibly furloughed

 
The employer is required to calculate “usual hours” in order that it can be compared with the actual hours worked. There are two different calculations that can be used to work out the employee’s usual hours, depending on whether they work fixed or variable hours.


The Government has prepared examples and has updated its calculator. See: https://www.gov.uk/government/publications/find-examples-to-help-you-work-out-80-of-your-employees-wages/examples-of-how-to-work-out-80-of-your-employees-wages-national-insurance-contributions-and-pension-contributions#fixed-hours


The calculations are complex and your average payroll person will face many challenges in understanding and applying the calculation. If only a small number of staff are ‘flexibly furloughed’ then these calculations might be manageable.  However, where large numbers are flexibly furloughed then these unwieldy calculations may confound employers and accelerate redundancies (if the loss of NICs and pensions grant from 1 August had not already done so).

 
Any change to “full furlough”?

 
From 1 July, the rule that furloughed employees remain on furlough for three weeks has been removed. This means that an employer could explore different full furlough arrangements (which would not require the calculation of usual hours that is a critical component of the flexible furlough scheme). For example, a “one-week-on/one-week-off” rotation might be attractive for some employers.


Consider the following:


1.    Check your existing arrangements with furloughed employees to see whether any further agreement is required and whether employees need to be notified of the intention to extend furlough. 

2.    If you are going to use the flexible furlough scheme, you will need to put in place a new written agreement.

3.    Ensure managers are keeping a contemporaneous record of hours worked for flexibly furloughed employees.

4.    If you intend to bring some employees back from furlough, start thinking about how you will decide who to bring back and ensure you communicate with employees in good time.

5.    If you offer a “top-up”, you may also need to consider whether it is affordable to do so on an extended basis as the Government grant will be decreasing over the coming months.

6.    Whether the cost and complexity of the extended furlough scheme means that employers need to accelerate redundancies and restructuring.

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