23 June 2020
Updated guidance on the Flexible furlough scheme
The Government has recently issued new guidance on its new flexible furlough scheme. B P Collins’ partners, Jo Davis and Chris Brazier, advise employers on how to implement it in the workplace.*
After indicating in mid-May that the extended Coronavirus Job Retention Scheme (CJRS) would have greater flexibility, Chancellor, Rishi Sunak, has confirmed that the new CJRS would allow employers to bring their furloughed employees back to work on a flexible basis.
From 1 July, employers can bring those employees who have previously been furloughed back to work on a flexible basis. The return to work can be for any amount of time and on any shift pattern, while still being able to claim under the CJRS for the hours not worked by those employees.
Employers will have complete flexibility about the nature of those working arrangements with previously furloughed employees. The Government seems to recognise that employers need to have that degree of flexibility as they adapt to the relaxation of lockdown and can assess their requirements.
What are the practicalities?
When claiming under the new CJRS for furloughed hours, which will commence on 1 July, employers will need to report and claim for a minimum period of a week – so employers will not be able to take decisions about their need on a day to day basis. Those making claims for longer periods, such as those on two weekly or monthly cycles, will still be able to do so.
It is a requirement that employers must discuss and agree the new arrangements with their employee and confirm that agreement in writing. Employers will then need to report the hours worked and the usual hours an employee would be expected to work in a claim period.
For worked hours, employees will be paid by their normal salary in accordance with their employment contract. As always, employers will be responsible for paying the tax and NICs due on those amounts.
The trade-off for this flexibility is that the number of employees an employer can claim for cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS. This will be achieved by closing the CJRS to new entrants. So from 30 June onwards, employers will only be able to furlough employees that they have furloughed for a full three-week period prior to 30 June. This means that the final date by which an employer could have furloughed an employee for the first time was the 10 June, in order for the current three-week minimum furlough period to be completed by 30 June. Click here for more information on coming off furlough.
There is one exception to this, with the government recently confirming that parents on statutory maternity and paternity leave who return to work in the coming months after a long period of absence, will be permitted to be furloughed. This will only apply where they work for an employer who has previously furloughed employees.
The increased flexibility also comes at a cost with employers being required to top up salary as the cap is tapered down.
Scaling down of the Government’s contribution to CJRS
Firstly, tapering will only begin in August, with payments for June and July unaffected. If an employee works from July onwards in accordance with the new flexible CJRS, the employer will have to pay them for the hours they work.
In August, the Government will pay 80% of wages up to a cap of £2,500. However, employers will be required to pay Employers National Insurance (ER NIC) contributions and pension contributions for the hours the employee does not work. The Government has estimated that, based on an average claim value of £1,380 p/m, this amounts to around 5% of gross employment costs per employee.
In September, the Government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay ER NIC and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500. Again, the Government has estimated that this amounts to around 14% of gross employment costs per employee.
In October, the CJRS will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will pay ER NIC and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
In the month the CJRS comes to an end, the Government has estimated that the cost attributed to the tapering amounts to around 23% of gross employment costs per employee – based on the average claim value.
Abuse of the CJRS
This is one area where there is still not much detail. There will be a better idea of what may be classified as abuse once the HMRC is in a position to start auditing claims by employers. To that end, it’s imperative that employers document everything they agree with furloughed employees.
*(It’s important to note that the Treasury Direction hasn’t been announced, which will ultimately determine how the scheme is administered.)