New detailed guidance has been released around how flexible furloughing will work
On 29 May the UK Chancellor, Rishi Sunak, outlined further details on the extension of the Coronavirus Job Retention Scheme (CJRS). He confirmed that flexible furloughing would be introduced from 1 July 2020 but that from August, employers would be required to start meeting some of the costs. He also confirmed that the cut-off date for placing any new employee on furlough would be 10 June 2020.
As with anything, the devil is in the detail and Employment lawyers and HR professionals alike have been eagerly awaiting further guidance. This was published on 12 June 2020 in updated guidance for employers and employees, along with new guidance on:
The following guidance has also been updated:
The latest version of the Treasury Direction issued the by the Chancellor, should be read alongside the guidance. The Treasury Direction is the legal framework and in the event of any inconsistencies between the guidance and the Treasury Direction, it is likely that the Treasury Direction will take precedence.
10 June cut-off and the maternity/paternity exemption
Subject to the exemption below, the CJRS is now closed for new entrants and going forward employers will only be able to furlough employees they have previously furloughed for a full 3-week period.
The cut-off date of 10 June originally applied to everyone. However, on 9 June 2020 the government announced a new exemption to this rule which is that parents on statutory maternity and paternity leave who return to work after 10 June, will be permitted to be furloughed. This will only apply where they work for an employer who has previously furloughed other employees.
The exemption also covers those retuning from adoption leave, shared parental leave and parental bereavement leave.
The position under the “old” CJRS was that in order to be eligible, employees could not carry out any work for their employer. The new scheme, from 1 July, permits part-time working.
The latest guidance confirms that the employer and the employee are completely free to decide on any working pattern. However, it remains the case that during the hours which an employee is being recorded as on furlough, they cannot undertake any work for the employer.
One of the key changes taking effect from 1 July is the disposal of the minimum 3 week period for furlough. After this date, employees can be placed on (and off) furlough for any amount of time, but any claim through HMRC’s portal must be in respect of a minimum 1 week period.
There is also a caveat in that until 1 July, any claims that started prior to this date, must run for the full 3 week period. For example if an employer had been rotating employees on furlough and a “new” period began on 22 June, the employees on that rotation would need to remain furloughed until 13 July 2020. After this date, the employer will be free to rotate employees every 1 week (for example), if it wished to do so.
The guidance appears to suggest that in order to take advantage of flexible furlough, a written agreement will be required which sets out the hours that an employee will be working and the hours they will be on furlough.
This appears to be different from the rules in relation to employees who are furloughed full-time, as, in theory, this could be agreed orally with an employee with such agreement being confirmed in writing by the employer (but without the need for an employee to sign such an agreement). It is unclear whether this distinction is intentional but, as we have highlighted previously, employers would be wise to ensure that any arrangement is in writing and signed by the employee.
The guidance conflicts on whether records should be kept for 5 or 6 years. The safest course of action may be to keep records for 6.5 years, in case the government confirms the longer retention period and in case a claim / HMRC investigation is started in year 6.
How much can you claim?
From 1 July, employers will only be able to claim for the maximum number of employees they have claimed for in any previous claim. This may be relevant for employers who have been rotating employees (and so have never claimed for all of them in any one period).
For employees on flexible furlough, the amount of the grant will be reduced proportionately. This means, for example, employees who are on furlough 50% of the time will receive 50% of the £2,500 cap (in July).
The calculations for employees on flexible furlough will be complicated and HMRC has provided examples for salaried employees and employees who work variable hours.
For salaried employees, the calculations will be based on contracted hours worked at the end of the last pay period ending on or before 19 March 2020. For employees whose hours vary, employers will need to consider the “usual” hours they worked. This must be done by reference to the higher of either:
- the average number of hours worked in the tax year 2019/2020; or
- the corresponding calendar period in the tax year 2019/2020.
Employer top-ups from 1 August
As outlined in our previous briefing, employers will be required to make contributions from 1 August. These are mandatory and employers cannot agree with an employee not to pay these.
If an employer cannot afford to pay the contributions, it may be an option to amend the terms and conditions of the employees contracts themselves.
- 10 June 2020 – was the last date an employee could be placed on furlough for the first time, save for if they are returning from family leave.
- 1 July 2020 – the new flexible furlough scheme becomes live. Employers do not have to pay any contribution towards the grant but will need to pay employees for hours worked. The cap and grant will be reduced proportionately to hours not worked.
- 31 July 2020 – all claims for the period ending 30 June 2020 must be made before this date.
- 1 August – employers required to contribute to employer national insurance and pension contributions.
- 1 September – in addition to NICs and pension contributions, employers will be required to pay 10% of wages (with the government contributing 70%), reduced proportionately for any hours actually worked.
- 1 October – in addition to NICs and pension contributions, employers will be required to pay 20% of wages (with the government contributing 60%), reduced proportionately for any hours worked.
- 31 October – the CJRS will close.
Employers should review the new and updated guidance.
Employers will need to carefully consider whether they wish for furloughed staff to return to work part-time. It is worth remembering that flexible furloughing is not compulsory and employers can keep staff at home if they wish.
If any new flexible furloughing arrangements are to be made, employers will be required to enter into a written agreement with the employee.
The process of calculating the hours worked/not worked and the amount that can be reclaimed from HMRC may be complex and employers would be wise to keep a detailed record of how any figures are reached.
Now is the time to start considering your workforce requirements post- furlough. Will you dovetail the phasing out of the CJRS with a redundancy exercise? If so, the last dates for starting collective redundancy consultation and lodging form HR1 will be 16 September 2020 (if proposing over 100 redundancies) and 1 October 2020 (if proposing 20-99 redundancies).
Given its track record, it seems likely that HMRC may continue to review and amend its guidance.
Article by TLT LLP – Stuart McBride
