Over the weekend, the government released guidance about upcoming changes to the coronavirus job retention scheme (also known as the furlough scheme). The changes relate to new flexible furlough arrangements that will be available for employers to operate as they ease out of lock down and before the scheme closes as the end of October.
The new flexible furlough scheme is due to take effect from 1 July. Although the ability to rotate employees between working and non-working is appealing to employers, the complexity of the arrangements and calculating those flexible furlough payments is anything but. We have prepared a brief summary of the key points to note for employers below but should you need any detailed advice then you should contact us:-
What is the flexible furlough scheme?
Previously, an employee had to be on furlough leave for a minimum period of 3 weeks, during which they could not do any work for their employer at all. The furlough scheme will become “flexible” from 1 July which will allow employees to work for some days (or even part days) and be on furlough leave for other days. This additional flexibility will be great for employers that need to slowly ease back into operation and will not necessarily have work or funds to allow staff to return to work fulltime. For example, an employee would be able to work Monday and Tuesday and then be on furlough leave for Wednesday, Thursday and Friday.
The claim periods for these new flexible arrangements are going to be limited. So any claim in respect of the period before 30 June will have to be made before 31 July. Any claim in respect of a period after 1 July must start and end with the same calendar month which means periods of furlough leave will not be able to overlap months.
Agreement and record keeping
As employees have been prohibited from working for their employer while on furlough since the scheme commenced, it is likely that the furlough agreement an employer has with staff will currently prohibit employees from carrying out any work for the employer during their furlough period. If an employer wishes to take advantage of the flexible furlough arrangement, it will be necessary for the furlough agreement to be amended or a fresh agreement entered into to record the new flexible terms.
The rules around record keeping will remain the same however there are a few additional points to note for employers who are taking advantage of the flexible arrangement. For those employees on flexible furlough leave, employers must keep a record of the usual hours worked by the employee, details of the calculation used to calculate those hours and the actual hours worked during the furlough period. This record must be retained for 6 years.
An employee must have had a minimum of 3 weeks of furlough leave prior to 30 June 2020 in order to be eligible for furlough (so they must have been put on furlough on or before 10 June 2020).
There is an exception to the rule for employees returning from maternity or paternity leave after 10 June. These employees can be furloughed as long as the employer has used the scheme before 10 June.
From 1 July, employers will not be able to claim furlough for more employees than it has in any previous claim. So for example, if the employer has only ever claimed for a maximum of 20 employees during any period before 1 July, they will not be able to exceed this amount going forward.
Calculating flexible furlough payments
The way in which flexible furlough payments are calculated is complex and considers a number of factors, including the usual hours worked, the hours actually worked and whether the employee has fixed or variable pay.
There are a number of worked examples online which the government has provided and intend to guide employers through these calculations.
Upcoming changes to the scheme
As a reminder, employers will have to start contributing to the wages of furloughed employees from 1 August:
From 1 August 2020 employers will be required to meet the cost of employer NICs and pension contributions.
From 1 September 2020 employers will also have to pay 10% towards an employee’s wages as well as NICs and pension contributions.
From 1 October 2020 employers will have to pay to 20% towards an employee’s wages as well as NICs and pension contributions.
We anticipate that these changes will force many businesses to review their existing arrangements. These additional costs may not be affordable and may trigger the need for employers to make decisions regarding employee numbers and terms of employment.
Our employment team are on hand to advise you about making potential redundancies and to help you avoid the pitfalls which could lead to unfair dismissal claims and compensation payments being payable to employees. Please do get in touch if we can be of assistance.