Flexible Furlough – what do employers need to know?
15 June 2020
Late on Friday night the Government finally released its long-awaited update on ‘flexible furlough’, which is the name it has given to the fact that employers have the option for employees to carry out some work whilst they are on furlough. We take a look at what flexible furlough is, and what the new information tells us.
What is flexible furlough and when does it start?
At the moment, under the Coronavirus Job Retention Scheme (CJRS) anyone who is furloughed cannot carry out any work whatsoever for their employer. However, the scheme rules are changing from 1 July, and employers will be specifically allowed to bring furloughed employees back to work part-time whilst still claiming under the furlough scheme for the hours the employees are not working.
The idea is that the employees can come back to work for as much or as little time as you like (or you can still keep them completely furloughed if you want to). For any hours or days they work, you have to pay them in full, but you can still claim the furlough grant for the hours or days that they don’t work, as compared to what they would normally have worked.
Who is eligible?
Flexible furlough is only available to employers who have furloughed someone under the CJRS since it launched. Also, employers will only be able to use flexible furlough for employees who they have furloughed for at least 3 consecutive weeks on the scheme previously. This is as we covered in our previous article here – it meant that 10 June was the deadline for people to be furloughed for the first time. However, the 10 June deadline won’t apply if you have members of staff who were on certain types of statutory family friendly leave – more detail about that is available below.
It is important to be aware that from 1 July 2020 an employer cannot furlough more employees than the maximum number of employees it had on furlough for any period up to 30 June. This means that if you have been rotating people in and out of furlough, you may find that from 1 July you cannot have all of them on furlough at the same time.
For example, if you have had 30 employees on furlough at a time, but 60 of them in total, then the maximum number you can make a claim for at any one time is 30. The only exception to this is if you have people returning from certain types of statutory family friendly leave, as discussed below.
Exceptions to the 10 June deadline
Although, as stated above, the last date for someone to be furloughed for the first time was 10 June (in order for them to spend 3 consecutive weeks on furlough before 1 July), there was significant campaigning about the difficulties this would cause for people who were not due to return from family friendly leave until after that deadline. The Government has recognised the problem and has agreed to make an exception.
This will work as follows:
- You must have furloughed at least one employee for 3 consecutive weeks previously under the scheme prior to 30 June
- the employee in question must have been on family friendly leave starting before 10 June and ending after 10 June
- the employee was on your payroll on or before 19 March 2020
- the employee has been away on any of the following types of leave:
- shared parental
As well as an exception to the 10 June deadline, employees in this situation also can increase the maximum number you can claim for under the scheme. This is because when you calculate the maximum number you can claim for, you can add employees returning from family friendly leave to that total.
Dates and minimum periods
Under the current version of the CJRS, employees have to be furloughed for a minimum of 3 weeks. From 1 July this will no longer apply.
After 1 July employers won’t be able to make any claims under the CJRS that overlap calendar months. This is because of the changing rules under the scheme regarding the maximum grant and the employer contribution (see below).
Any claim under the scheme for the period before 30 June must be made by 31 July 2020.
How do you put an employee on flexible furlough?
If you have already furloughed staff previously, then you should hopefully have a written agreement in place to cover that. However, the Government guidance is very clear that a new agreement will be required if you want to put someone on flexible furlough, and that this should be in writing and retained for at least 5 years.
The guidance seems to envisage that in most cases employers and employees will agree in advance what hours the employee will be doing while they are on flexible furlough.
Employers will need to keep records of the hours the employees work and the hours that they are claiming furlough for.
The guidance also states that employers will need to “make sure that the agreement is consistent with employment, equality and discrimination laws.”
Working out the hours worked and the furloughed hours
For salaried people, you work out what hours they would have worked, deduct the hours they actually worked, and the rest will be their furloughed hours.
For people with variable hours, you will need to work out what their ‘usual hours’ are. This will be the higher of their average in the last tax year (2019 – 2020), or their hours worked in the corresponding month in the last tax year. It is important that annual leave and overtime hours (other than where pay is discretionary) are included in the calculation.
The guidance contains various example calculations to help employers with this step. The examples are available here.
Making a claim for flexible furlough
Once you have completed the hours calculation above, you will need to make a claim. The steps you need to follow to do this are listed in the example here. They are not straightforward! There is also a useful CJRS calculator which is available here.
The calculations will differ each month, as for July the scheme will cover 80% of pay (up to £2,500) for furloughed hours, plus NI contributions and auto enrolment pension contributions, but then for August the scheme will no longer cover the NI and pension contributions on furlough pay. Then in September the employer will be expected to contribute 10% of wages (plus the NI and pension contributions on that and on furlough pay) and the Government’s contribution will drop to 70% of wages up to a cap of £2,190. Finally, for October, (the last month of operation of the scheme) the Government will pay 60% of wages up to £1,875, with employers paying 20% (plus the NI and pension contributions on that and on the furlough pay).
Unfortunately the complexity of the calculations and the fact that employers will soon have to start contributing to the costs of employees on furlough means that the scheme will become a less attractive option, which is likely to mean some redundancies may be brought forward.
Also, it is not clear at this stage how exactly flexible furlough will interact with sick pay and annual leave, especially as the guidance seems to envisage that the employee’s hours will be agreed in advance.
Although we have linked to the guidance documents where relevant above, we thought it would be helpful to list the most helpful ones again below as well:
If you are an employer with queries about furlough or flexible furlough, then we can help. Please call us on 01243 836840 for a no obligation chat, or email us at [email protected].