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Flexible Furlough Scheme (How Does It Work?)

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The Coronavirus Job Retention Scheme (CJRS) is changing from 1 July 2020. Under the new rules, flexible furlough is permitted, allowing employers to bring employees who have previously been furloughed back into work for any amount of time and any shift pattern, while they remain on furlough for hours not worked.

Changes also take effect impacting how much employers are entitled to claim and how claims are calculated.

‘Flexi-furlough’ is optional for businesses. Employees can remain ‘fully furloughed’ until the scheme ends on 31 October, and likewise they can be unfurloughed for a full-time return to work, in line with the needs of the business.

However, employers should be aware that for workers that continue to be furloughed, the level of financial support available is set to gradually reduce as the scheme winds down.

 

What is flexible furloughing?

From Wednesday 1 July 2020, employers will be able to bring back furloughed employees into work on a part-time basis. They can then claim under the CRJRS for up to 80% of furloughed employees’ wages on a pro rata basis for the hours not worked out of normal working hours.

The employer will still be able to claim under the CJRS for such employees’ normal hours not worked, but will have to pay in full for any hours worked, and will be responsible for tax and NI contributions on those payments.

To be eligible for the grant, employers will have to agree with their employees any new flexible furloughing arrangement and confirm that agreement in writing.

The minimum three-week period for furlough will also be removed, providing greater flexibility for employers to use arrangements to suit individual circumstances.

CJRS claims have to relate to a minimum one week (seven-day) period, meaning employers can only make four claims in a month.

 

Who is eligible for flexible furlough under the extended scheme?

Employers claiming under the Coronavirus Job Retention Scheme will need to check they remain eligible under the revised rules. It will also be important to understand how the new rules impact workforce management options and decision making.

To be eligible for flexible furlough, employees must have been on furlough leave for at least three weeks prior to 30 June 2020. They do not necessarily have to have been on furlough on 30 June, but they must have been previously furloughed on or prior to 10 June 2020.

Employees working at the end of June can be refurloughed under the revised scheme, provided they have previously been furloughed.

After 1 July, the number of employees an employer can claim for will be limited to the highest number claimed for in a previous month; for example, if a business claimed for 10 employees in April, 10 in May and 15 in June, they would be limited to claiming for a maximum of 15 employees in July.

It is not possible to add new ‘entrants’ to the CJRS, except where an employee has returned from maternity or other family leave such as shared parental leave.

Employers who have not claimed under the CJRS will not be permitted to join and make a claim under the revised scheme.

 

How does part-time furlough work?

Under the extended scheme, employers will have the flexibility to furlough workers on a part-time basis. Employees on flexible furlough can work for some days or part days, while being furloughed on others. As an example, an employee could work Monday to Thursday, and be furloughed Fridays.

The maximum claim under the scheme will be calculated on the basis of hours not worked.

Employers are able to use any kind of flexible working arrangement under the revised scheme. With the removal of the three-week minimum period, employers can look to make use of different rotated furlough arrangements, such as a one-week-on and one-week-off approach, which could help to avoid dealing with the potentially complex claim calculations for flexible furloughing.

There is also no limit on how long the flexible furlough has to last.

However, any change to furlough terms must be agreed with the employee and a new agreement entered into.

During furloughed days, employees remain subject to the same rules as to what they can and cannot do.

If an employee was furloughed after 10 June and has not yet completed the three-week minimum furlough period, they cannot be placed on flexible furlough on 1 July 2020, and must instead wait until the three-week period has finished.

Where it is not viable to bring back all furloughed workers, employers will need to proceed with caution if looking to unfurlough only some workers, or when distributing limited available work among employees.

This may mean deciding to require some employees to return to work while others remain on furlough, it could mean dividing work using the part-time work and flexible furlough.

Your decision making in respect of staffing will need to avoid discrimination while ensuring a balance between meeting business needs and the reality of current business demand.

 

How to claim for flexible furlough

After 1 July 2020, any one claim must start and end within the same calendar month. This is to allow for the administration of upcoming changes in August, September and October as the scheme winds down.

Employers can make more than one claim each month, but each period has to be at least seven days long. This means there will be a maximum of four claims per month.

The exception to this rule is where a business needs to claim for a few days at the beginning or end of a month, resulting in a week being split across two months, for example if you pay wages weekly. In this case, two claims would be required.

Claims for the period before 30 June must be made by 31 July 2020.

To calculate a flexible furlough claim, the employer is required to calculate the number of ‘usual’ hours worked by an employee, and then use this as the baseline to compare with actual hours worked during each claim period. Claims must be on the basis of the exact number of hours worked by an employee during the claim period.

For workers with fixed hours or pay, the calculation involves taking the number of hours actually worked during the pay period before 19 March 2020. For those on variable pay, use the higher of either the average number of hours worked in the tax year 2019 to 2020 or the corresponding calendar period in the tax year 2019 to 2020.

The amount you can claim is calculated as follows:

  1. Calculate the maximum wage amount.
  2. Calculate 80% of the employee’s usual wage. To calculate 80% of the employee’s usual wage the calculation is: [Salary] divided by [total number of days in pay period] x [number of furlough days in pay period].
  3. Calculate your employee’s minimum furlough pay. This is the lesser of 80% of their usual wage and the maximum wage amount.

Furlough days are days when an employee is either fully furloughed, or under a flexible working arrangement.

For employees on who are fully furloughed ie on furlough for the whole month, this will be the same as the number of days in the pay period.

 

Flexible furlough record keeping

Employers using the flexible furlough scheme must ensure they comply with their record keeping duties.

As part of each employee’s personnel records, you must retain the following for six years:

  • The claim period(s) for each employee
  • How much was claimed for each employee
  • Calculations for the figures claimed
  • Each furloughed employee’s usual working hours
  • Actual hours worked for employees flexibly furloughed

 

Changes to financial support for employers

The level of financial support available to employers will remain the same until the end of July.

From 1 August 2020, employers will be required to meet the cost of employer NICs and pension contributions, although the maximum claim amount will remain at 80% of employees’ wages capped at £2,500 per month.

From 1 September 2020, employers will also have to pay 10% towards an employee’s wages, lowering the monthly cap on the furlough grant to £2,187.50.

From 1 October 2020, an employer’s contribution towards an employee’s wages will increase to 20%, reducing the monthly cap on the furlough grant to £1,875.

The furlough scheme will end on 31 October 2020.

 

Employer NIC & pensions contributions

Employers can claim for NI contributions on the amount of furlough pay you have claimed under the scheme until 31 July.

After 1 August 2020, employers will no longer be able to claim for employer NI contributions.

For pensions, employers claim back the amount of the minimum employer auto-enrolment contributions on the sums claimed back from the government.

For claims for July 2020, if an employee is flexible furloughed, you will be able to claim for the auto enrolment pension contributions payable on the gross pay grant for the hours that the employee is furloughed.

From 1 August 2020, employers can no longer claim back for pensions contributions.

 

Continue furlough or make redundancies?

As the furlough scheme winds down, the level of administration in calculating claims increases and the amount of financial support available to employers gradually reduces, the reality for many employers may be that it will not be viable to bring workers back from furlough, even on a part-time basis, making redundancy the only option.

Redundancies can be challenging to handle and fraught with legal risk.

For those carrying out redundancies, it will be important to ensure you follow the correct process, including consultation, notice periods, selection criteria and offering suitable alternative employment where possible.

 

Need assistance?

In light of the changes, employers should give consideration to all of their workforce options and how any reliance on financial support under the furlough scheme is being managed out over the coming months.

It is also advisable to review all furlough agreements to ascertain if further consent and written agreement is needed in support of any new or altered arrangements, for example, when adopting furlough rotations, when bringing employees back to work on a part-furlough basis, and even when extending a full furlough arrangement.

DavidsonMorris’ employment lawyers can help with all aspects of workforce management and planning in response to the current crisis, including how to adopt flexible furloughing. Working closely with our specialists in HR, we provide comprehensive guidance on the options open to you as an employer when moving your employees through the stages of unfurloughing, or if you are having to consider redundancy or alternative working arrangements such as short-time working. For help and advice, speak to our experts.

 

Last updated: 15 June 2020

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