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Facts on Furlough (as at 3rd June 2020)

4 June 2020

Following the government’s recent announcement, our Employment Law Team outline some of the guidance on the intended changes to the Coronavirus Job Retention Scheme (CJRS).

The key financial points are as follows:-

⇒ CJRS will continue to run until the end of October 2020;

⇒ Employers will continue to be able to claim for 80% of wages (capped at £2,500 gross per month), plus employer pension and national insurance contributions for furloughed workers, throughout June and up to 31 July 2020;

⇒ From 1 August 2020, employers will still be able to claim for 80% of employee’s wages as per above; however, they will be required to pay employer pension and national insurance contributions;

⇒ From 1 September 2020, the government will reimburse employers the equivalent of 70% of employees’ salary (capped at £2,187.50 gross per month) with the requirement that the employer will have to contribute 10% of employee’s wages, in addition to employer pension and national insurance contributions; and

⇒ From 1 October 2020, the government will reimburse employers the equivalent of 60% of employees’ salary (capped at £1,857 gross per month) with the requirement that the employer will have to contribute 20% of employees’ wages, in addition to employer pension and national insurance contributions.

In addition to these changes, the government has announced that Employers will be able to bring furloughed employees back on a more flexible basis, with effect from 1 July 2020. Further details are expected on the Flexible Furlough Scheme on 12th June 2020 but here is what we know so far:

Flexible Furlough Scheme

⇒ As of 1st July 2020 employers will be entitled to bring furloughed employees back, to work on a part-time or reduced hours’ basis, whilst still being able to claim the CJRS grant for the employees’ normal hours which have not been worked.

⇒  It is a requirement of the scheme that claim periods are for a minimum period of one week, with employers being entitled to claim for longer periods, such as two weekly-cycles as an example, if it is better suited to the circumstances of the business.

⇒ When making claims, employers are required to report hours the employee has worked, and normal hours the employee would ordinarily work in a claim period.

⇒ Inevitably the needs of each business will vary so the employer is able to agree any working arrangement that suits them; however, the new working hours must be agreed with the furloughed worker and we recommend that this agreement should be confirmed in writing in the usual way. Please note that written confirmation of employees’ agreement is beneficial, albeit not necessarily legally required, but we would recommend obtaining some form of written agreement from employees and this can include email confirmation or text message correspondence, for example.

⇒ Employers should keep all records for a minimum of 7 years.

It appears that you can agree with employees any flexible part-time return to work which is suitable for your business; however, in terms of pay requirements during any Flexible Furlough:

⇒ The employee(s) would need to be paid their full normal rate of pay for hours worked; and

⇒ For the hours they have not worked, you can claim up to 80% of those hours through CJRS.

By means of example we will use an employee who earns £500 per week for working 40 hours during that period:-

If an employee returns to work from 1 July 2020, working 10 hours per week, you would have to pay them £125 for that period (being their pro-rata pay entitlement for working 10 hours);

You would need to report these hours worked to HMRC through your CJRS claim;

You could claim the CJRS grant against the remaining 30 hours they would normally work, meaning that, in July for example, you would be able to claim 80% of the remaining 30 hours’ they had not worked that week. This would be 80% of £375, resulting in a claim for £300 through the CJRS;

The employee would overall receive £425 for that week, as opposed to the standard furlough payment of 80% of their normal rate of pay, which would only give an employee £400 based on this example.

In addition to this, it seems each week can be different, so an employee could return for 10 hours in week one, 20 hours in week two, 5 hours in week three, but you will then need to calculate your claim through CJRS and submit that detail accordingly.

Finally, at present it appears that there is no limit or cap on the extent of the employee’s part-time working. For example, they could return to working 38 hours per week if they are normally contracted to 40 hours per week, and you could still claim the CJRS grant on the remaining 2 hours per week.

This appears to be the case on the basis of the government’s announcements so far; however, please note this could change and we are having to rely on interpreting the guidance in its current form, and various forms of commentary, until the full detail is issued.

We hope to be able to confirm all of these details on or around the 12th June 2020 once the government has published the full details, and in readiness for any Flexible Furlough arrangements you wish to put in place by 1st July 2020.

New Entrants to the Scheme

Whilst the eligibility criteria remains the same, in order for employers to benefit from the flexible furlough scheme, the requirements are that the employee must be on, or have previously been on, a period of furlough leave (for a minimum of 3 weeks) by 30 June 2020.

Those who have previously been furloughed but have now returned to the workplace can still benefit from Flexible Furlough for example. Equally however, this means that employees who have not previously been furloughed, must be furloughed by 10th June 2020 (to have completed the required 3 weeks’ furlough leave by the expiry date of 30 June 2020) at the latest in order to benefit from the ongoing CJRS grant.

As mentioned above, this summary is correct as of 3rd June 2020; however, due to the ever changing nature of these circumstances, we recommend that you obtain legal advice on your particular circumstances if you are unclear on any aspect. If you do require any legal advice, then please do not hesitate to contact our Employment Team.

Click here to visit our Employment & HR Team Pages

To contact the Employment Team call: 01267 239 488 or email employment@redkitelaw.co.uk