On 8th July 2020 the chancellor announced the next steps for the coronavirus job retention scheme (also known as furlough).
The scheme changed, on 1st July, with the flexible furlough scheme being announced. The flexible furlough scheme has given employers greater flexibility, allowing furloughed workers to undertake some work on a part time basis while the employer continues to be supported by the scheme.
The scheme is due to wind down flexibly and gradually, ending on 31st October 2020. Following the end of the scheme, a new incentive has now been offered to businesses in a bid encourage them to retain staff. The new announcement being the promise of £1,000 for every worker who returns from furlough who remains continuously employed to the end of January 2021. For every qualifying employee retained, payments will be made from February 2021.
The furlough scheme, which was announced just before the UK went into lockdown, has had significant uptake supporting one million employers, with approximately 9.3 million workers being placed on the furlough scheme.
A reminder of the current furlough guidance is below.
On 12th June, the Government released further guidance regarding the ‘flexible furlough’ scheme. In summary:
• From 1st July, employers can require employees to work for some of the week and be furloughed for the rest, in proportions decided between the employer and the employee.
• From 1st July the minimum three week period for furlough has been removed. There is no minimum period, although we understand that any claim through the CJRS portal must be in respect of a minimum one week period (employers can only put in four claims a month, not 31).
• From 1st July, employers who decide to use the flexible furlough scheme will be able to claim a pro-rata’d amount of 80% of salary, based on the proportion of hours not worked out of normal working hours. To calculate the normal working hours for those with fixed hours/pay, you take the number of hours worked in the pay period before 19th Match 2020. To calculate the normal working hours for those with variable pay, you take the higher of (a) the average number of hours worked in the tax year 2019-2020 or b) the corresponding calendar period in the tax year 2019-2020.
• Here is one of HMRC’s worked examples of how to calculate furlough for a flexibly furloughed employee: https://www.gov.uk/government/publications/find-examples-to-help-you-work-out-80-of-your-employees-wages/example-of-a-full-calculation-for-an-employee-who-is-flexibly-furloughed?mc_cid=0b1a0e042a&mc_eid=e74e30cc36
• From 1st July where the employer wishes a currently furloughed employee to begin to work part-time, it will be necessary for the furlough agreement to be amended by a counter-signed side letter, or for a fresh furlough agreement to be entered into, which permits this and deals with the circumstances in which the employer can require the employee to work. We can provide a draft letter for you if this is something you require.
As a reminder, please see below regarding the upcoming changes regarding the furlough scheme:
• from 1st August, employers will have to pay employee's national insurance contributions and pension contributions, and can no longer reclaim them through the furlough scheme.
• from 1st September, the government will only reimburse 70% of salary (up to a maximum of £2,190). Employers are required to top-up to 80% (or more, depending on what the employer agreed with the employee).
• from 1st October, the government will only reimburse 60% of salary (up to a maximum of £1,875), and employers will continue having to top up to 80% (or more).
• the furlough scheme will close on 31st October 2020.
If you have any questions or need guidance from our employment team, do not hesitate to contact us on 01642 636500.