With lockdown restrictions easing, the Coronavirus Job Retention Scheme, CJRS (the government furlough scheme) is changing. From 1st July, employers will see the introduction of flexible furloughing (combining non working furloughed hours with part time working arrangements), and from 1st August, the government will be asking employers to contribute to the cost of the furlough scheme on a gradually increasing basis over the ensuing three months. It is hoped that this will balance the need to bring the scheme to an eventual close at the end of October, whilst providing businesses with continued support as they gradually rebuild and recover.
To enable the introduction of part time furloughing, and support those already furloughed back to work, claims from July onwards will be restricted to employers currently using the scheme and previously furloughed employees. The scheme will therefore close to new entrants from 30th June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30th June. This means that the final date by which an employer can furlough an employee for the first time will be 10th June, in order for the current three week furlough period to be completed by 30th June. Employers will have until 31st July to make any claims in respect of the period to 30th June. For employers using the furlough scheme from 1st July, the number of employees that can be claimed for in any single claim period must not exceed the maximum number claimed for under any claim up to 30th June.
How does ‘flexible furloughing’ work?
From 1st July, employers will be allowed to bring furloughed employees back to work on a part time basis, without breaching their furloughed status. This can be for any amount of time and on any agreed shift pattern. In simple terms, the arrangements will be that any worked hours will be paid at the normal rate of pay (and covered in full by the employer) and any normal hours not worked will be classed as furloughed, and can be claimed for under the prevailing terms of furlough (see below for forthcoming changes to the burden of cost for furlough pay). It remains a fundamental condition of the furlough scheme that any hours claimed as furlough are not worked – and therefore the employee may not do any work during these hours which provides a service or generates revenue for their employer.
How much will employers have to contribute to furloughed wage costs?
From 1st August, the government will gradually taper the extent of the grant provided through the CJRS, requiring a modest contribution from employers to reflect a gradual return to business. Whilst furloughed employees will receive the same overall contribution for any furloughed hours as under the current terms, the cost of this will be split between the government and the employer, as follows:
- June and July: The government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICS) and pension contributions. Employers are not required to pay anything.
- August: The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions – for the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.
- September: The government will pay 70% of wages up to a cap of £2,187.50. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 14% of the gross employment costs the employer would have incurred had the employee not been furloughed.
- October: The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500. For the average claim, this represents 23% of the gross employment costs the employer would have incurred had the employee not been furloughed.
What else do employers need to know about flexible furloughing?
- From 1st July, employers may not submit claims which cross calendar months. This means that for any employee whose period of furlough starts before the end of one month, but continues into the subsequent month, two separate claims must be submitted.
- When claiming for furloughed hours, employers will need to report and claim for a minimum period of 7 calendar days, unless the claim period includes either the first or last day of the calendar month, and a claim has already been made for the period ending immediately before it.
- Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period, the actual hours worked, and the number of hours furloughed (and therefore not working) during each claim period. As with all other records relating to furlough claims, these must be retained for 6 years.
- If you choose to flexibly furlough an employee, this must be done by consultation and mutual agreement, and employers should provide a new written agreement confirming the agreed arrangements. This written agreement should be retained for a period of 5 years.
- Whilst the furlough scheme prior to 1st July requires that any period of furlough lasts for a minimum of three weeks, there is no minimum or maximum duration applied to flexible furloughing, enabling employers to manage staffing in a more agile fashion as they resume their business. (Employees whose period of furlough commenced before 1st July are obliged to adhere to the three week minimum duration – even if this extends into July – remaining on full furlough for the entire period, but may transition to a new flexible furlough arrangement once the full three weeks have elapsed).
- Flexible furlough can be entered into and out of multiple times, but each period of flexible furlough should be agreed by consultation and the terms set out in writing as previously noted.
- Employers are advised not to submit flexible furlough claims until they are certain of the hours worked; in the event that the employee works more hours than originally agreed, a repayment will have to be made by the employer to the HMRC for any element of the grant which represents an overpayment.
Full and detailed guidance notes as regards planning, calculating and submitting claims under the revised CJRS terms can be found on the government website.
Will the Self Employment Income Support Scheme (SEISS) be extended for a further phase?
Yes. The deadline for applications for the first SEISS grant is 13th July. The Chancellor has announced a second grant, which will open in August and enable eligible self employed individuals (who can prove that COVID-19 has adversely affected their business) to claim a second taxable grant worth 70% of their average monthly trading profits, paid out in a single instalment covering three months’ worth of profits, and capped at £6,570 in total.
The eligibility criteria are the same for both grants. Furthermore, a claim can be made in this second phase even if no claim was made in the first phase; for example, business may only have been adversely affected by COVID-19 in this later phase.
Further detailed announcements are expected from the Government on 12th June.
For more information on the furlough scheme and returning to work after lockdown please see our blogs: COVID-19: Our HR team answer your FAQs and Return to work: Safeguard your employees and workplace. If you have questions about your circumstances specific to your business then please don’t hesitate to get in touch.