Flexible furlough – How does it work and what are the new changes?
Updated: Feb 16
On 12th June, the government published its guidance on flexible furloughing through the Coronavirus Job Retention Scheme, setting out the way forward for the scheme until it is phased out. It provides details of the complex mechanism under which flexible furloughing - part-work/part-furlough - will be allowed from 1st July 2020.
How are the rules about who can be placed on furlough changing?
It is now no longer possible to add new entrants to the revised furlough scheme unless the employee is returning from maternity or shared parental leave.
From 1st July, employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours the employee does not work. From this date, only employees for whom an employer has successfully claimed a previous grant will be eligible for more grants under the scheme.
This means the employee must have previously been furloughed for at least 3 consecutive weeks taking place any time between 1st March and 30th June 2020. For the minimum 3 consecutive week period to be completed by 30th June, the last day an employee could have started furlough for the first time was 10th June, unless the employee is returning from maternity or other family leave. The government will allow these individuals to be furloughed on their return regardless of whether they have been furloughed previously.
The number of employees an employer can claim for after 1st July cannot exceed the number in any previous claim. For example, an employer that has claimed for 20 employees in April, 40 in May and 30 in June will not be able to claim for more than 40 employees in any claim after 1st July.
How is the financial support available to employers changing?
The financial support will remain unchanged until 31st July 2020, although from 1st July there are changes to the way in which claims must be made and the new flexible furloughing of employees will be allowed.
1st August 2020
The monthly cap on the furlough grant will remain at 80% of employee wages, capped at £2,500 but employers will be required to meet the cost of employer NICs and pension contributions.
1st September 2020
Employers will also have to pay 10% towards an employee’s wages (resulting in the monthly cap on the furlough grant available to reclaim reducing to £2,187.50)
1st October 2020
An employer’s contribution towards an employee’s wages will increase to 20% (resulting in the monthly cap on the furlough grant available to reclaim reducing to £1,875).
The furlough scheme will end on 31st October 2020.
Is there a deadline for claiming under the old scheme?
Yes, any claim in respect of the period before 30th June must be made by 31st July 2020.
In the period after 1st July 2020, a claim must start and end within the same calendar month. This is because the scheme will change from month to month. It is possible to make more than one claim in each month, but each claim must be for a period of at least seven calendar days.
The only exception to the seven-day claim is if an employee is making a claim for a few days at the beginning or end of a month (e.g. if you pay weekly and the month end results in a week being split across two months). There, an employer will need to make two claims (one for each month).
How will flexible furloughing work?
From 1st July, employees can return to work part-time (for full or part days) and be furloughed for the other days they are not working. For example, an employee could work on Monday and Tuesday and be furloughed on Wednesday, Thursday and Friday. The cap on the furlough grant will be proportional to the hours not worked.
Any working pattern is permitted under the flexible furlough scheme and there is no restriction on the length of time it must last. Employers will need to pay employees their normal pay in full (i.e. their pre-furlough rate of pay) for any hours they work when flexibly furloughed. Employers will then be able to claim a pro-rated furlough grant for any hours which flexibly furloughed employees do not work. This is calculated based on an employee’s “usual hours” when not on furlough, minus the hours they actually work.
Where a previously furloughed employee started a new three-week furlough period after 10th June, the flexible furlough cannot start until those 3 weeks have expired. This is most likely to affect employees who have been on a rotating furlough arrangement.
How does an employer work out the employee’s usual hours and furloughed hours?
If your employee is flexibly furloughed, you will need to work out the employee’s usual hours and record the actual hours they work as well as their furloughed hours for each claim period. There are two different calculations you can use to work out your employee’s usual hours, depending on whether they work fixed or variable hours.
How will we calculate the furlough grant if we use flexible furloughing?
Although the option to place employees on flexible furlough has been welcomed, the guidance sets out very complex rules for calculating the amount of grant which may be claimed in these circumstances.
The calculation varies depending on whether the employer has previously calculated the grant on the basis of a fixed salary or variable pay (depending on the hours worked), but in each case an employer is required to calculate the number of “usual hours” in order that it can be compared with the actual hours worked. The government has prepared a number of examples to assist with the calculation and has updated its online calculator.
The calculation complexities are increased further by the need to ensure claims are contained within the same month. An employer should not claim until they are sure of the exact number of hours an employee will have worked during the claim period.
Where an employer has a small number of employees it wishes to place on flexible furlough, these calculation complexities may be manageable but for large employers with complicated staffing arrangements, it could be an extremely difficult task.
Do employers have to get the agreement of employees to move them on to the flexible furlough scheme?
If an employer wishes to agree a flexible furlough arrangement, it must enter into a new agreement with the employee. The agreement must be consistent with employment, equality and discrimination laws, it must be kept for six years and the employer must keep records of how many hours their employees work and the number of hours they are furloughed (i.e. not working).
The rules about what an employee is (and is not) permitted to do during any days they are furloughed remain unchanged.
Flexible furloughing is not compulsory and full furlough will remain available until 31st October with employers required to make the additional financial contributions.
If there is some work available, is there a way to bring employees back and avoid the flexible furlough calculations?
The requirement for an employee to remain on furlough for three weeks is being removed from 1st July and this would allow an employer to explore different rotated furlough arrangements which would not require the calculation of usual hours that is a component of the flexible furlough scheme.
For example, an employer could consider a “one-week-on/one-week-off” rotation. This might help employers to be more flexible in their arrangements and fairly distribute the work that is available.
It is also possible to require some employees to return to work and allow others to remain on furlough. Making decisions about who returns to work can be complicated and it is necessary to ensure you do so in a non-discriminatory way. Staffing decisions as workplaces reopen are probably the most challenging issue facing employers.
What if an employer makes an error when claiming under the scheme?
Employers can now declare on their next claim if they have made an error in a previous claim that has led to an overpayment. The new claim amount will then be reduced to reflect this. No further action is needed but the employer should keep a record of this adjustment for six years.
If an employer makes an error that has resulted in an underclaimed amount, they need to contact HMRC to amend the claim and additional checks may be carried out.
Looking for more advice or guidance on this matter, or any other business-related issue?
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