What Is The Flexible Furlough Scheme?

On 30 May 2020 Chancellor Rishi Sunak announced changes to the Furlough Scheme, this was followed on 12 June by the publishing of updated guidance. The new Flexible Furlough Scheme permits employees to work part of the week and be furloughed for the remainder of the week from 1 July 2020 and require contributions from the employer from 1 August 2020. Changes are also being made to the way in which claims must be made.

The legal framework for the revised scheme will require a further Treasury Direction as the current one only applies until 30 June; no date for publication of a revised Direction has been given.

These are the headline points:

  • 10 June: last day that employers can place employees on furlough.
  • 30 June: the original Furlough Scheme closes to new entrants. (The three-week furlough period must therefore start on or before 10 June). Unless the employee is returning from statutory maternity, adoption, paternity or shared parental leave before 31 October will be permitted to be furloughed.
  • 1 July: flexible furlough is being introduced, meaning employees will be able to work part-time and be furloughed part-time.  Businesses will decide how that will work (in terms of the time split). When claiming the Coronavirus Job Retention Scheme grant for furloughed hours; you will need to report and claim for a minimum period of a week, for grants to be calculated accurately across working patterns.
  • 1 August: employers will have to pay employee’s national insurance contributions and pension contributions, and can no longer reclaim them through the CJRS.
  • 1 September: the government will reimburse 70% of salary (up to a maximum of £2,190). Employers will pay ER NICs and pension contributions and 10% of wages, to make up the 80% up to the cap of £2,190 (or more, depending on what the employer agreed with the employee).
  • 1 October: the government will reimburse 60% of salary (up to a maximum of £1,875), and employers will continue topping up to 80% (or more, depending on what was agreed with the employee) plus ER NICs and pension contributions.
  • 31 October: the furlough scheme will close.

Updated guidance is released regularly and I will update this page as more details are announced.

This page was firstly published on 31 May 2020 and the last update was 22 June 2020.

What Is Flexible Furlough Leave?

There is undoubtedly a lot of benefit to employers in being able to reintroduce individuals back into the working environment on a flexible basis. To that extent it is obviously helpful that the Government has sought to make this as amenable as possible.

There are no restriction on the working hours or shift pattern; the employer must pay for the hours worked and can claim the CJRS grant for the furloughed hours. You are able to agree whatever pattern they see fit for any period of time. So a working week could include a combination of working time and furlough time or you might decide to rotate employees on a week in work and a week furloughed basis. Hours can vary from week to week for those who are brought back, so that would enable you to agree a working pattern that gradually increases between 1 July and 31 October so employees start off working a small amount of time, maybe one day a week or a few hours each day, and gradually increase the proportion of working time so that by 31 October 2020 they are working their normal hours.

The Guidance Note contemplates that the employee might be brought back on a flexible basis, but in practice then work more hours. So, although the employee’s agreement is needed to come back on a flexible basis, which is to be recorded in writing, it looks as though parties might in practice vary that. Clearly if employer and employee agree a different working pattern from that recorded in writing, then the parties would be well advised to have a document somewhere that records this revision, against any future HMRC audit.

The existing furlough agreement will need to be superceded by a new furlough agreement which permits the employee to work during furlough and deals with the circumstances in which the employer can require the employee to work. The difficulty for employers at this stage is that the government has not yet announced the full detail of the changes to the CJRS in order to draft the new furlough agreements and get them agreed with employees before 30 June.

Employers must agree the working arrangement with their employee and confirm that agreement in writing. The conditions for furloughed hours continue to includes that employee does no work during those hours.

The guidance makes clear that employers can choose to furlough part of their workforce and can also continue to fully furlough employees after 1 July if required.

In essence, employers and furloughed employees can agree – in writing – that the employee will return and do some work which will be less than their normal contractual working hours, whilst still be on furlough. Whilst the furloughed employee is working, they are to be paid their normal contractual pay (e.g. 100%) by the employer plus the employer will be responsible for paying NICs etc. due on those amounts for hours worked. However, for any hours the employee is not working, calculated against their normal weekly hours, employers will be able to claim the furlough grant plus the corresponding employer NICs, auto enrolment pension contributions for July – although this will change from August.

How Will The CJRS Grant Be Affected?

1 July 2020 Changes
From 1 July 2020 claims can only be submitted for employees who were validly furloughed for a three week period on or before 10 June 2020. This means employees who were subject to a rotating furlough arrangement are eligible to be re-furloughed under the new scheme.

There is one exception to the rule about being able to furlough new employees after 1 July. Individuals who are returning from maternity, shared parental leave, adoption leave, paternity or parental bereavement leave after 10 June can validly be furloughed for the first time, provided the employee started that period of leave prior to 10 June and are returning after 10 June and before 31 October 2020. The employer in question must also previously have submitted a claim for other furloughed employees, i.e. this is not their first furlough claim. Similarly when calculating the cap for the maximum number of people that can be furloughed by the employer, no account needs to be taken of individuals being furloughed for the first time by virtue of this exception for maternity returners etc.

For periods starting on or after the 1 J‌ul‌y, the maximum number of employees that can be claimed for in any period cannot exceed the maximum number claimed for in a previous claim period ending on or before 30 June 2020. The Guidance Note gives the example of an employer who has submitted monthly furlough claims for 30, 20 and 50 employees. The maximum number therefore of employees who can be furloughed after 1 July is 50. If you employee 20 people and have been operating a rotating furlough arrangement i.e. 10 working and 10 furloughed at any one time you would not be able to bring all 20 back into the workplace on a part time arrangement as that would mean your claim would exceed your previous maximum of 10 employees.

From 1 July claim periods can no longer overlap calendar months, to allow for the changing levels of the grant. Therefore claims for any periods up untill 30 June 2020 must be made by 31 J‌ul‌y 2020 and claims for any periods up untill 31 July 2020 must be made by 31 August 2020 and so on.

It is no longer going to be permissible to have a furlough claim that covers a longer period. Employers may only make one claim for a furlough grant per period, so it is obviously important that the employer gets it right, when submitting the claim. This may particularly be an issue with employees who are flexibly furloughed. The Guidance Note says that employer should claim when it has certainty about the number of hours its employees are working. Interestingly the Guidance Note contemplates that the employee might be brought back on a flexible basis, but in practice then work more hours, necessitating an alteration in the grant claimed. So, although the employee’s agreement is needed to come back on a flexible basis, which is to be recorded in writing, it looks as though parties might in practice vary that, and this then is reflected in the application for the grant. Clearly if employer and employee agree a different working pattern from that recorded in writing, then the parties would be well advised to have a document somewhere that records this revision, against any future HMRC audit. The Guidance Note indicates that claims for grants can be made 14 days before the claim period ends and are usually paid out within six working days after the claim is made.

The 3 week minimum furlough period will no longer apply for any period of furlough from 1 July onwards, this is to allow for increased flexibility. However, any claim to HMRC must cover a period of at least one week.

The Government will continue to pay 80% of wages (subject to the monthly cap of £2,500), employer NIC’s and pension contributions for any of the employees’ normal hours that they do not work up until the end of July. Employers will though be responsible for paying 100% of wages for the hours the employees are working.

1 August 2020 Changes
A tapering of the grant will begin from 1st August, the Government will continue to pay 80% of wages up to the cap but employers will take over payment of employer NICs and pension contributions.

1 September 2020 Changes
In September, the Government contribution will lower to 70% of wages up to a cap of £2,187.50 for the hours the employee is not working. Employers will continue to pay employer NICs and pension contributions, and, additionally, must pay 10% of wages to make up to 80% of the total wages, up to the cap of £2,500.

1 October 2020 Changes
Finally, in October, the Government contribution will lower again to 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will continue to pay employer NICs and pension contributions, and will have to pay 20% of wages to make up to 80% of the total wages, up to the £2,500 cap.

The cap on the furlough grant will be proportional to the hours not worked – so if the employee is not working for 50% of his or her normal working hours the cap would be £1,250 during July and August, £1,093.75 in September and £937.50 in October.

The scheme will close on 31 October 2020.

Which Employees Will Be Eligible?

Any employee who has validly been furloughed for a three week period on or before 10 June 2020 is eligible to be furloughed from 1 July 2020 onwards.

There is an exemption for those returning from maternity, shared parental, adoption, paternity or parental bereavement leave who were on payroll on or before 19 March and on leave before 10 June and end the period of parental leave before 31 October (and provided the employer has met the condition for other employees).

The maximum number of employees who can be furloughed in any claim period cannot exceed the maximum number in any one claim made for furlough periods ending on or before 30 June 2020 (with the exception of parental leave returners who can be added to that cap).

Where a TUPE transfer takes place after 10 June 2020, the transferee would not be able to meet the first condition in relation to transferring employees even if the employees have been furloughed by the transferor. Helpfully, the “Check which employees you can put on furlough” guidance confirms that an exception is made in these circumstances where the transferor has submitted a claim for 3 weeks’ furlough prior to 30 June for the relevant employees. The number of relevant employees is also added to the transferee’s cap under the second condition, enabling the transferee to continue to furlough these individuals without affecting its ability to furlough its existing workforce. Similar provisions apply for changes in ownership under PAYE succession rules, transfers from a liquidator, and consolidations of group company PAYE schemes.

Is Consent to Furlough Necessary?

The requirements for agreeing furlough from 1 July 2020 are set out in the ‘Check if you can claim for your employee’s wages’ guidance. This has been reworded and now notes that agreements to furlough should be consistent with equality and discrimination laws, as well as employment law, and that records of hours worked and furloughed should be kept. The guidance makes clear that flexible furlough will require specific agreement on the new furlough arrangement; there is specific reference to a “written agreement”.

The Guidance Note states: “If you flexibly furlough employees you will need to agree this with the employee (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement”.

Whilst the Guidance Notes are clear that agreement should be reached it does not clarify what amounts to agreement for these purposes. We feel asking the employee to countersign a letter or a similar written acceptance via email would be sufficient. Some employment lawyers are suggesting the employee would be agreeing to the flexible arrangement simply by turning up for work at the pre-ordained time, and then accepting pay for that period worked based on the fact that they are working – we think that is a dangerous approach. Our preferred approach would be to have a written agreement with each employee which can be accepted, either before or on the employee’s first day back at work. The advantage of a written agreement is there is no confusion about the extent of your instructions to the employee about the hours to be worked and the hours to be spent on furlough and you will be confident that the employee has, in countersigning this, accepted your instructions.

Refusing Consent
The Government’s insistence that there needs to be an agreement with the employee seems to give the employee a choice as to whether or not to accept flexible furloughing. Many employees may be concerned about a return to work. If employers are looking to ease employees back gently into the working environment, by making use of flexible furloughing, the right to consent (or not) to flexible furloughing hands a key element of the decision making back to the employee concerned. This seems to place the employer in the slightly odd situation of being able to furlough or bring an employee back on a full-time basis but not to require a part-time return to work.

What Is The Minimum Furlough Period?

Any period of furlough that starts on or before 30 June 2020 must still last 3 consecutive weeks (even though it will end after 1 July) in order for the wages to be claimed under the CJRS. Any period of furlough starting on or after 1 July 2020 can be for any duration (the restrictions being on the period for which claims are made (see below), rather than the period of furlough itself).

Basic Contracted Hours and Flexible Furlough

If an employees contract states they will work 40 hours per week then the working pattern is a weekly one. You would then work out the daily rate by dividing the number of hours (in this example 40 hours by the number of calendar days (not working days) in the working pattern (i.e. 7). This then gives a daily number of usual hours, which is then multiplied by the total number of calendar days in the paid period in question. In calculating this you should ignore any periods of annual leave, sick leave or family related statutory leave, and run the calculations as if the employee was at work in the normal way.

If the employee tends to work more than their basic hours, this is irrelevant unless it can be said that there has been a contractual amendment such that the employer and employee have agreed to a higher number of basic hours.

For employees with variable hours where pay varies by the amount of time worked, the calculation to establish “usual hours” is a little more complicated. It can be based on the average number of hours worked in the tax year 2019-20 or looking at the precise corresponding calendar period in the year 2019-20. This has to be repeated each month for the corresponding calendar period.

Having worked out the usual hours then the next step is to calculate the furloughed hours during the period for which the claim is being made. This can be done by calculating the total number of usual hours, and then subtracting the hours actually worked “even if this is different to what you agreed”. The employer is then able to claim a percentage, up to £2,500 per calendar month or 80% of the employee’s wages, whichever is the lower, reduced by a fraction equivalent to the number of furloughed hours over the employee’s total usual hours. In short, for the employee who works half of their time whilst furloughed, the employer will only be able to claim up to a maximum of £1,250 per month for the furloughing scheme.

Pay For Worked Hours

The National Minimum Wage rates increased on 1 April 2020 but as we know furlough pay is based on payments made prior to that date. So you will need to check thos rates to ensure you are paying returning furloughed workers the correct hourly rate for worked hours.

Ending Furlough

The idea is that employees will be able to come back to work. The scheme is designed so that employers don’t need to make redundancies and then recruit a new workforce once the crisis is over – their existing workforce will be ready and waiting to resume work. But guaranteeing a return to work does not appear to be a condition of the Scheme.

However, if trading conditions have not improved sufficiently for you to take all the furloughed employees back when the scheme ends then you will be able to make them redundant, subject to the usual rules on redundancy. This is significant because other European countries that have similar schemes in place are imposing restrictions on employers making redundancies. No such conditions are being imposed in the UK.

The employee guidance says that “your employer can still make you redundant while you’re on furlough or afterwards”. Neither the guidance for employers nor for employees explicitly says that collective or individual redundancy consultation can be carried out during furlough or whether that would count as work – although, on the basis that it is not making money for the employer or providing services, we would hope that a sensible approach would be taken.

Where there is no work for a furloughed individual it may be necessary to terminate their employment by reason of redundancy. A fair and reasonable redundancy process will need carrying out at that time, with collective consultation if the threshold numbers are met, and a redundancy payment due to eligible employees. Termination and redundancy payments should be calculated on pre-furlough pay.

The guidance is clear that the furlough grant cannot be used for redundancy pay.

£1k ‘bonus’ For Every Employee Brought Back From Furlough
On 8 July 2020 the Chancellor of the Exchequer, Rishi Sunak, announced during his summer statement that employers will receive a £1,000 “job retention bonus” for every worker they bring back from furlough and continue to employee until January 2021.

For every employee who:

  • has been furloughed at some point during the lifespan of the scheme,
  • remains employed by you between November 2020 and January 2021, and has
  • must have earned at least the Lower Earnings Limit for national insurance (£520 per month) between November and January.

you will receive a bonus of £1,000 bonus from the Government.

Keeping Records

You will need to have in place a system where you can accurately record what hours the employee is contracted to work, what hours they did in fact work and what hours they were furloughed for during each CJRS claim period.

As with the original furlough scheme HMRC are retaining the right to retrospectively audit all aspects of the Scheme, with the scope to claw back amounts claimed fraudulently or in error. It is vital therefore that you keep records of payments made and correspondence sent to employees in relation to furlough leave and the employees agreement to the period of leave.

HMRC guidance states that records of communication sent to furlough employees, and their responses, and how you calculated the claim must be kept for five years. The second iteration of the Treasury Direction (which is legally binding) states that the written agreement must be retained until at least 30 June 2025, the original publication simply stated that evidence should be retained for at least five years.

Top Tips

  • Revisit your furlough leave letters – do they need to be updated?
  • What does bringing furloughed workers back look like? What would it mean to your business? Do you have the work to be able to sustain a full return? Would a rotation be better?
  • Think carefully about selection particularly where employees are vulnerable or who have other responsibilities as schools remain for the most part closed.

Guidance Documents

All of the guidance notes have been updated, with the exception of the “Work out 80% of your employees’ wages” page, the text from which has effectively been updated and moved to two new pages entitled “Steps to take before calculating your claim” and “Calculate how much you can claim“. (The holiday pay section in the Work out 80% page has been moved, substantively unchanged, to the Check if you can claim page, so that the Work out 80% page is no longer relevant.) There is a helpful page with links to all the current guidance here and an overview focussing mainly on the changes to employer contribution levels here.

The UK Government has published a slew of Guidance Notes in connection with the changes to the Furlough Scheme applying from 1 July 2020. The updates to Guidance Notes have been spread liberally throughout the existing Guidance Notes, and new Guidance Notes have been created. New Guidance Notes include examples of how to calculate a claim for a flexibly furloughed employee and how to calculate generally how much the employer is entitled to claim under the Scheme. The multiplicity of Guidance Notes and worked examples, together with the fact that we are up to the 14th iteration now of the main Guidance Note is making life harder for employers wanting to make use of the scheme but concerned about falling foul of the increasingly complex arrangements.

Whilst a lot of the attention will be focused on the detail of the Flexible Furloughing Scheme (with more than one lawyer making the connection between the initials of the Flexible Furloughing Scheme and their complexity), there are a number of other important changes buried in the detail.

However, it is important to remember that the Guidance Notes have in the past departed from the Treasury Direction. It has been reported that there will be a Treasury Direction on Thursday 18 June 2020, and further information may well come out of that document and shed yet further light on some of the issues in this bulletin. We will produce a further update when that is published.

The key documents related to the Scheme are:

Government Factsheet
The Government Factsheet was published shortly after the Chancellors announcment about the new Flexible Furlough Scheme and began to add some flesh on the bones of the original announcment.

Download Now

Treasury Direction
The Direction amounts to a legally-binding order from the Treasury to HMRC, with which HMRC must comply and accordingly the Direction will prevail to the extent there is any conflict between them.

On Friday 22 May 2020 a further Treasury Direction (dated 20 May) was published modifying the legal framework for the Coronavirus Job Retention Scheme (CJRS) and introducing the Flexible Furlough Scheme applicable from 1 July.

Download Now

Employer Guidance From HMRC
Find out if you’re eligible and how much you can claim to cover wages for employees on temporary leave (‘furlough’) due to coronavirus (COVID-19).

Contents

  • Who can claim
  • Employees you can claim for
  • Agreeing to furlough employees
  • When your employees are on furlough
  • Before you claim
  • Contacting HMRC

Open The Link

A Guide to Claiming Wages From HMRC
Claim for 80% of your employee’s wages plus any employer National Insurance and pension contributions, if you have put them on furlough because of coronavirus (COVID-19).

Contents

  • Before you start
  • What you’ll need
  • How to claim
  • After you’ve claimed

This guidance page was updated on 12 June to include details on how the scheme will change from 1 July.

The first time you will be able to make claims for days in July will be 1 July, you cannot claim for periods in July before this point.

31 July is the last day that you can submit claims for periods ending on or before 30 June.

Open The Link

Check Which Employees You Can Put On Furlough To Use The Coronavirus Job Retention Scheme
Find out which employees you can put on furlough and claim for through the Coronavirus Job Retention Scheme.

Contents

  • Employees you can claim for
  • If your employee’s health has been affected by coronavirus (COVID-19) or any other conditions
  • If your employee is on leave
  • Individuals you can claim for who are not employees
  • After you’ve checked which employees you can claim for

This guidance page was updated on 12 June to include details on how the scheme will change from 1 July.

The first time you will be able to make claims for days in July will be 1 July, you cannot claim for periods in July before this point.

31 July is the last day that you can submit claims for periods ending on or before 30 June.

Open The Link

Steps To Take Before Calculating Your Claim Using The Coronavirus Job Retention Scheme
Decide the length of your claim period, find out what to include when calculating wages and work out your employees’ usual and furloughed hours before you calculate how much you can claim.

Contents

  • Deciding the length of your claim period
  • What to include when calculating wages
  • Work out your employee’s usual hours and furloughed hours
  • What to do next

This guidance page was updated on 12 June to include details on how the scheme will change from 1 July.

The first time you will be able to make claims for days in July will be 1 July, you cannot claim for periods in July before this point.

31 July is the last day that you can submit claims for periods ending on or before 30 June.

Open The Link

A Guide to Working out 80% of Wages From HMRC
Find out how to calculate 80% of your employee’s wages, National Insurance Contributions and pension contributions if you’ve furloughed staff due to coronavirus (COVID-19).

Contents

  • Record keeping requirements
  • Use the calculator
  • Work out the maximum wage amount
  • Work out 80% of your employee’s usual wage
  • Work out how much you can claim for employer National Insurance contributions
  • Work out how much you can claim for employer’s pension contributions
  • How to claim
  • Contacting HMRC

This guidance applies to claims from 1 July to 31 October 2020

Open The Link

Making a Claim
Claim for 80% of your employee’s wages plus any employer National Insurance and pension contributions, if you have put them on furlough because of coronavirus (COVID-19).

Contents

  • What you’ll need
  • How to claim
  • After you’ve claimed
  • Contacting HMRC

This guidance page was updated on 12 June to include details on how the scheme will change from 1 July

The first time you will be able to make claims for days in July will be 1 July, you cannot claim for periods in July before this point.

31 July is the last day that you can submit claims for periods ending on or before 30 June.

Open The Link

Reporting Employees Wages to HMRC After You Have Claimed Through CJRS
Find out how and when to report employees’ wages to HMRC using the PAYE Real Time Information system.

Contents

  • If you’re using the grant to pay wages
  • If you’re using the grant to reimburse wages already paid
  • If you have not paid your employees’ full wages yet

This guidance page was updated on 12 June to include details on how the scheme will change from 1 July

The first time you will be able to make claims for days in July will be 1 July, you cannot claim for periods in July before this point.

31 July is the last day that you can submit claims for periods ending on or before 30 June.

Open The Link

Examples Of How To Calculate The Amount You Should Claim For An Employee Who Is Flexibly Furloughed
These examples have been added to illustrate the full sequence of calculation steps that an employer must take when claiming through CJRS for a flexibly furloughed employee.

Contents

  • Work out your claim period
  • Work out your employee’s usual hours and furloughed hours
  • Work out 80% of your employee’s normal wage
  • Work out how much you can claim for employer National Insurance contributions (NICs)
  • Work out how much you can claim for employer’s pension contributions

Open The Link

A Guide to Claiming back SSP From HMRC
Find out if you can use the Coronavirus Statutory Sick Pay Rebate Scheme to reclaim employees’ coronavirus-related Statutory Sick Pay (SSP).

Contents

  • Who can use the scheme
  • Records you must keep

Open The Link

A Step By Step Guide for Employers From HMRC
This step by step guide will take you through fve sections:

Step 1: Essential information
Step 2: Before you make your claim
Step 3: Calculating your claim
Step 4: Making a claim
Step 5: What to do next

Download Now

ACAS Advice for Employers

Chapters

  • Staying at home and social distancing
  • Vulnerable people and those at high risk
  • Self-isolation and sick pay
  • Furlough and if a workplace has to close
  • Using holiday
  • If an employee needs time off work to look after someone
  • If someone has coronavirus symptoms at work
  • Good practice steps for employers
  • More coronavirus advice

Open The Link

What’s Next?

The government’s guidance is constantly being updated and I will review the content of these pages as more information becomes available.

If you have any questions please call me on 0114 360 0626 or simply email me at enquiries@kea-hr.co.uk.

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Coronavirus and Flexible Furlough Scheme