UPDATE: The CJRS (furlough) scheme has been extended until 2 December 2020 as a result of the new lockdown restrictions applicable in England from 5 November 2020 until 2 December 2020.
Flexible furlough
Under the flexible furlough scheme, furloughed staff will be able to carry out work for their employer from 1 July onwards on any working pattern.
In order to be eligible to be furloughed from 1 July onwards, the worker must have been furloughed for at least 3 weeks prior to 1 July (so the latest date by which their first period of furlough could begin was 10 June). There is an exception for working parents returning from statutory leave (maternity, paternity, shared parental, adoption or parental bereavement leave) who return to work after 10 June 2020, providing that their employer has previously furloughed other staff.
The guidance sets out that the flexible furlough working pattern must be agreed in writing with the worker (and this will be required in many cases anyway where there is an alteration to contractual working hours).
From 1 July employers will be able to claim the furlough grant for the proportion of the worker's normal working hours which they do not work (looking at hours actually worked, rather than what was agreed – so if they work more hours than originally agreed, the employer must base its claim on the hours worked in practice). The employer will be responsible for paying the worker in accordance with their contract for the hours they work - actual worked hours are not covered under the furlough grant.
Unlike the version of scheme which remains in force up to 30 June, there is no minimum furlough period from 1 July. Rotated furloughed staff who started a 3 week furlough period after 10 June 2020 must complete that 3 week period before they can be moved onto the new flexible furlough scheme.
Calculating normal working hours
The key to the flexible furlough scheme is that, from 1 July 2020, the furlough grant covers the difference between the hours the worker actually works and their 'normal working hours'. The guidance sets out how to calculate normal working hours.
For staff with fixed hours whose pay does not vary according to the hours they work, calculating normal working hours is straightforward – their normal working hours are their contractual working hours.
For staff who are entitled to receive paid overtime or similar payments, or whose hours vary, the calculations are more complex. Their normal working hours are the higher of:
- the average number of hours they worked in the tax year 2019/2020; and
- the corresponding calendar period in the tax year 2019/2020 (so if you are making a claim for the period 1 – 31 July, you will need to look at the hours they worked from 1 – 31 July 2019).
For these staff, the hours which count as working hours are:
- hours at work;
- any leave for which they received full pay (e.g. holiday). Other statutory leave such as maternity leave is not included;
- any overtime for which they were contractually entitled to be paid.
Once the employer has calculated the normal working hours, they must subtract the hours worked from the worker's normal working hours in order to calculate their furloughed hours. The furlough grant is then payable for the furloughed hours only.
The calculations will be somewhat time-consuming and it remains to be seen how many employers will be put off by the complexity.
As claims must be based on the hours the worker actually works, employers should submit claims under the scheme when they know what the actual worked hours will be. An employer who over-claims in error will need to report this to HMRC when they submit their next claim so that an adjustment can be made. Employers should keep records of furloughed workers' working hours (together with records of their calculations and claims) for 6 years.
Changes to furlough grant
From 1 August 2020, employers will need to contribute to furlough pay (and the furlough grant and the maximum cap will therefore be reduced) as follows:
- from 1 August, employers will need to pay employers' NICs and auto-enrolment pension contributions and the furlough grant will no longer cover these; and, in addition,
- from 1 September, employers will need to pay 10% wage costs (and the furlough grant will cover the remaining 70%); and
- from 1 October, employers will need to pay 20% wage costs (and the furlough grant will cover the remaining 60%).
As before, topping up furlough pay beyond the furlough grant is optional (although a reduction in wages to 80% is a matter for agreement between the employer and the worker).
The scheme closes on 31 October 2020.
Making claims from 1 July 2020
Any claims for the period up to 30 June 2020 must be submitted by 31 July 2020.
From 1 July, there are some key changes to the way that claims must be made:
- the minimum claim period is 1 week;
- claims cannot span two calendar months (as the scheme changes on the first day of each month). Some employers will need to submit two claims for June, depending on their claim date;
- for workers who are flexibly furloughed, employers will need to report their actual working hours to HMRC as part of their claim; and
- employers need to report any previous over-claim to HMRC.
The key Government guidance is here, with a step-by-step guide here and worked examples here.
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This note gives general guidance and an overview but is not intended to be legal advice.
The situation in relation to COVID-19 is developing rapidly: we have sought to ensure that the contents are accurate as at the date of publication but you are advised to check for the latest information.
Public Health England provides public health information and up-to-date information is available here.
Guidance for employers and employees provided by Advisory, Conciliation and Arbitration Service, is also available here.
For any legal advice on specific circumstances please contact your usual Howard Kennedy Employment Team contact.
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