The UK government on 12 June published additional updated guidance on the Coronavirus Job Retention Scheme (the Scheme), explaining how the flexible furlough arrangements can be implemented by employers looking to bring back staff in a gradual manner. The Scheme has been extended until the end of October 2020, and from 1 July 2020 employers have flexibility to furlough employees on a part-time basis. Working parents returning from maternity, paternity, or parental leave are also eligible to be furloughed under the Scheme, which has now closed for all other new entrants.
This LawFlash supplements our detailed prior analysis of the recent extension of the scheme.
From 1 July 2020, employers will be able to bring back furloughed employees on a flexible part-time basis. Flexibly furloughed employees will be able to work for any amount of time and on any shift pattern. Employers can claim under the Scheme for 80% of their salary for the furloughed portion of time (subject to the £2,500 per month cap and calculated on a pro rata basis). Employees cannot work or provide any services to their employer during hours which they are recording as being on furlough, even if they receive a top-up wage.
Under the flexible furlough arrangements, employers can place employees on minimum one-week rotation periods (rather than furloughing for three weeks’ minimum). As the deadline for new entrants to the scheme has now passed, only employees who have previously been furloughed will be eligible (except for working parents returning from leave).
Employers should consider the following key practical points:
In recognition that the Scheme is coming to a close, employers will not be able to furlough more employees in July than they did in any of the months between March and June.
|
July |
August |
September |
October |
|
|
Government contribution: employer NICs and pension contributions |
Yes |
No |
No |
No |
|
Government contribution: wages |
80% up to £2,500 |
80% up to £2,500 |
70% up to £2,187.50 |
60% up to £1,875 |
|
Employer contribution: employer NICs and pension contributions |
No |
Yes |
Yes |
Yes |
|
Employer contribution: wages |
- |
- |
10% up to £312.50 |
20% up to £625 |
|
Employee receives |
80% up to £2,500 per month |
80% up to £2,500 per month |
80% up to £2,500 per month |
80% up to £2,500 per month |
HMRC has provided a detailed worked example to assist employers to calculate the amount for which they can claim. Please note that employers intending to use the online calculator will first need to work out the usual hours worked of any employee being placed on flexible furlough.
Employers will need to work out the employee’s usual hours and record the actual hours they work as well as their furloughed hours for each claim period. Broadly speaking, for employees with fixed hours and salary that does not vary by the number of hours worked, the calculation will be as follows:
Employers will also need to calculate Employer’s National Insurance contributions (NICs) and the employer’s pension contribution. Note that from 1 August 2020, the Scheme will no longer contribute towards the cost of employer NICs and pension contributions; employers will need to fund these payments themselves.
Employers are advised not to make a claim for employees who are flexibly furloughed until they are sure of the exact number of hours worked during the claim period. Practically speaking, employers should only claim when they have agreed with employees the number of hours for which the employees will be working during the claim period. Employers who claim for furlough payments in advance will be liable to HMRC for any grant overpayment if it transpires that employees on flexible furlough have worked more hours than originally envisaged.
The Scheme officially closed to new entrants on 10 June 2020. As the deadline has now passed, employers will only be able to furlough previously furloughed employees from 1 July. The UK government has now qualified this rule for working parents returning to work after statutory maternity or paternity leave, adoption leave, or parental bereavement leave. Those who fall within this category of returning employees remain eligible for being furloughed for the first time, provided that their employer has previously used the Scheme for other employees and the returning employees started leave before 10 June 2020 and returned to work after 10 June 2020.
The Scheme is becoming increasingly complex for employers. Employers will need to determine how to choose which employees should be furloughed on a flexible basis and for how long each furloughed employee now needs to work. Employers are reminded that equality and discrimination laws will continue to apply in the usual way. While the Scheme has become more flexible, it still does not permit furloughed employees to do any work for their employer while on furlough leave. Therefore, employees on a flexible furlough schedule will need to be very clear about their working and furlough hours. Employees blurring the lines of work and furlough could risk invalidating the employer’s claim. HMRC has confirmed that it will be checking claims and a portion of the grant will need to be returned if a claim is found to be fraudulent or based on incorrect information.
As the rules change and the Scheme becomes more complex, employers may decide that it is no longer feasible to furlough employees and instead consider reductions in pay or hours on a long-term basis or even redundancies. We discuss the effects that winding-down the Scheme will have on employers in a separate LawFlash.
For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. Find resources on how to cope with the post-pandemic reality on our NOW. NORMAL. NEXT. page and our COVID-19 page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts, and download our biweekly COVID-19 Legal Issue Compendium.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
London
Matthew Howse
Louise Skinner
Trainee solicitor Sol Gelsomino contributed to this article.