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The extension to the furlough scheme? What are the updates to the scheme?

Written by Ross Meadows, Cacy-Leigh Neilson on Monday, 13 July 2020. Posted in HR, People

Another month of lockdown, another government announcement, but is the new flexible furlough scheme like being told by your IT department to switch your computer off and on again when it is not working?

The extension to the furlough scheme? What are the updates to the scheme?

Another month of lockdown, another government announcement, but is the new flexible furlough scheme like being told by your IT department to switch your computer off and on again when it is not working?

Whilst the Coronavirus Job Retention Scheme has helped employers whose operations have been severely affected by Covid-19 to retain employees and avoid redundancies, a major update to the scheme was required in order to alleviate the pressure on employers who will be required to contribute to the wage subsidy from 1 August on a phased basis.

With effect from 1 July 2020, employers can request eligible employees (employees who have previously been furloughed for at least 3 consecutive weeks taking place any time between 1 March and 30 June 2020 or who are returning to work from a period of family friendly leave), to return to work on a part-time basis, whilst still being able to claim furlough for the days not worked.

Employers will be required to pay normal wages (pre-subsidised, unless otherwise agreed) for the hours the employee works and the subsidy from the government will only then apply to the hours not worked. The caps to the government subsidy still apply but are pro-rated to reflect the hours the employee works.

Before submitting a claim through the CJRS portal, employers will need to calculate the employee’s appropriate wages. This is calculated by using the length of a claim period; the employees usual wage; and the employees’ usual hours, part-time working hours and furloughed hours.

This very much sounds like advanced mathematics to me so let us put this into practice:

For example, for a 1 to 31 July claim period, an employee working 40 hours a week with a usual salary of £2,000 per calendar month returns to work part-time 2 days a week and is furloughed for the rest of their usual hours.

Step one would be to determine the employees furlough wage for the month, in this case £2,000 multiplied by 80% = £1,600[1].  Step two would be to work out the usual working hours for the claim period, the hours that the employee worked, then the hours the employee did not work and was on furlough. For instance, if their usual working hours were 184 hours, and they worked 80 hours then their furlough hours would be 104 hours. The third and final step would be to multiply the employee’s furlough wage by the number of furlough hours, then divide by the number of usual hours (£1,600 x 104 ÷ 184  = £904.35) and this will give you the sum that you can claim back from the government for that claim period.

Sincerest apologies if this has brought on post-traumatic stress from secondary school maths classes, but you will be pleased to know there is a government furlough calculator that can assist. Alternatively pass it on to your payroll provider or accountant to calculate – they love playing with numbers!

Like a computer needs to be restarted after an update, the flexible furlough updates require agreements between employers and employees to be restarted. The government guidance talks of having a new written agreement in place setting out the new terms of furlough – the employee’s usual hours and wage, the hours the employee will be expected to work whilst on flexible furlough and the hours the employee will be on furlough.

There is no longer a minimum 3-week period that employees must be on furlough for the employer to be able to claim, however employers can only put four claims through the CJRS portal in one month (unless the claim is for the first or last few days in a month). This means that claims will be in respect of a minimum of 1-week periods.

All claims put through the CJRS portal must start and end within the same calendar month. Employers can no longer put claims in that cover more than one payroll period; therefore, employers should be certain of the details of employees on flexible furlough before submitting claims.

How can a business take advantage of the flexible furlough scheme?

The flexible furlough scheme may seem like further administrative hassle, but for employers who did not previously have express written consent from employees to be put on furlough, could use this as an opportunity to ensure their HMRC record requirements are met.  

As there is no longer a minimum 3-week period that employees must be on furlough for employers to claim, employers could enter into as many flexible furlough agreements with the employee as required by the business workload or as required by employee personal caring responsibilities. As long as the employer keeps a record of the employee’s hours worked and hours furloughed in each claim period, employees can continuously be switched on and off furlough as required.

Although some schools are re-opening from the 1 June 2020 and children begin to return to school, this is not the case for all age groups. Businesses could use the flexible scheme to bring staff who have caring responsibilities back to work gradually, by adjusting hours of work around school and home-work responsibilities.

The flexible scheme can further be used to a business’ advantage in meeting its health and safety obligations for employees. As more businesses are beginning to prepare for employees to return to the office by following the governments social distancing guidelines, the flexible furlough scheme can be used to rotate staff coming in to the office, working from home and those who are shielding.

Businesses should be cautious to not use discriminatory criteria when selecting employees to remain on furlough, come back to work full time and those put on flexible furlough.

As with unhelpful solutions from your IT department, no matter how many times you switch your computer off and on again, the solution may not be the appropriate one for you. Employers are not required to use the flexible furlough scheme and if the financial conditions of your business have not improved sufficiently for employees to return to work part-time or full-time at the end of furlough, it may be time to look at making redundancies (subject to the usual rules on redundancy in employment law).

Any other go-to information that will be essential for SMEs to be aware of

Just like finally managing to understand the latest software update, only for it to change a month later, further changes to government and employer contributions to the flexible furlough scheme will occur each month from 1 August to 31 October 2020, when the scheme closes.

The changes implemented will be as follows: from 1 August 2020, employers will not receive the grant for employer national insurance and pension contributions on furlough pay. From 1 September 2020, the government will pay 70% of employees' furlough pay, capped at £2,187.50, requiring the employer to pay 10%, capped at £312.50. Lastly, from 1 October 2020, the government will pay 60% of employees' furlough pay, capped at £1,875, requiring the employer to pay 20%, capped at £625.

Please note a further software update from the government to incentivise employers to keep on furloughed employees after the furlough scheme finishes at the end of October 2020. Employers will receive a one-off bonus of £1,000 for each furloughed employee who is still employed on 31 January 2021.  Whether this will lead to more employees keeping their jobs remains to be seen.

[1] If the individuals furlough wage is above the cap, you must use the £2,500 cap in the calculations.

About the Author

Ross Meadows

Ross Meadows

Ross is Head of the HR and Employment team. He is also a member of the Business Immigration team.
Cacy-Leigh Neilson

Cacy-Leigh Neilson

Cacy-Leigh Neilson is an Associate in the Employment and Data protection departments at Oury Clark Solicitors. She regularly advises across a breadth of areas including employment law, data protection, intellectual property and immigration.

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