HCR Law Events

2 June 2020

Furlough: What is Changing and When?

On Friday (29 May 2020), the Chancellor announced a number of key changes to the Coronavirus Job Retention Scheme (the “Scheme”). From July, employers will have more flexibility over their furlough arrangements and from August they will be required to contribute to furloughed salaries. The main aim of the changes is to support employers with bringing staff back to work.

A new factsheet, published by HM Treasury (available here) to accompany the announcement, provides some more details on the changes and how “flexible furloughing” will be implemented. In addition, both the guidance for employers and the separate guidance for employees have been updated.  Further guidance from HMRC and directions from the Treasury in respect of the revised Scheme are expected to be available from 12 June.

In the meantime, the key changes of which employers should be aware are summarised below.

This note is correct at the time of writing, 2 June 2020.

The key changes

When is the final date that employers can furlough staff?

The Scheme will close to new entrants from 30 June 2020. After that date, employers will only be able to furlough those employees who have spent a full 3 weeks on furlough before this date. The final date by which employers can furlough employees for the first time is therefore 10 June.

It seems to be the case that an employee furloughed on or before 10 June 2020 could return to work and then be furloughed again after 30 June 2020. However, the government is yet to specifically confirm this and at the present time, employers should not rely upon being able to re-furlough staff in this way. Unfortunately, this point may not be clarified before the cut-off date of 10 June.

How will the Scheme grant work from now until the end of October?

From 1 July 2020, the number of employees an employer can claim for in any claim period cannot exceed the maximum number it has claimed for under any previous claim during the March to June operation of the Scheme. Employers who have used a rotating furlough will need to be mindful of this additional cap.

For June and July 2020, the grant will be available on the same basis as it is currently (i.e. the lesser of 80% of wages and £2,500) with the Government also covering the cost of employer’s National Insurance contributions (NICs) and minimum auto-enrolment employer pension contributions.

Over the remaining months of the Scheme (1 August to 31 October 2020), the intention is that the government will reduce its contribution with a corresponding increase in the employer contribution:

  • From 1 August: The government will pay 80% of wages up to a cap of £2,500. Employers will be required to pay employer’s NICs and pension contributions.
  • From 1 September: The government will pay 70% of wages up to a cap of £2,187.50. Employers will be required to pay employer’s NICs and pension contributions and at least 10% of wages so that employees continue to receive the minimum 80% (up to a cap of £2,500).
  • From 1 October: The government will pay 60% of wages up to a cap of £1,875. Employers will be required to pay employer’s NICs and pension contributions and at least 20% of wages so that employees continue to receive the minimum 80% (up to a cap of £2,500).

What is “flexible furlough” and how will it work?

From 1 July 2020, the Scheme will include an added level of flexibility to allow employers to bring employees back to work on a part-time basis, dependent on the needs of the business and if it is safe to do so. This is a month earlier than previously announced.

When working, employees should be paid their “normal” wage and employers will be responsible for paying the employee for those hours, subject to tax and National Insurance contributions. Employers will receive a furlough grant for the remainder of an employee’s usual working hours. The £2,500 cap on the furlough grant will be reduced so as to reflect the proportion of hours not worked by the employee.

To be eligible for the grant, employers must agree with their employee any new flexible furloughing arrangement and confirm this in writing.

It is envisaged that employers will be able to agree with an employee how many hours they will work on flexible furlough and that this could change from week to week. This is because when claiming the grant for furloughed hours, employers will be able to report and claim for a period of one week at a time.

In practice, employers are likely to need to implement a system for tracking hours worked (and not worked) in order to determine how much they need to pay an employee and how much they can claim from the government.

Further guidance on flexible furloughing, and how employers should calculate claims, is due to be published on 12 June 2020.

When will the Scheme close?

As anticipated, the Scheme will close on 31 October 2020.

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Rowena Kay, Associate

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