Flexible furlough scheme - what employers need to know

The government has now released details of the new flexible furlough scheme, which employers can take advantage of from 1 July 2020, under the Coronavirus Job Retention Scheme.

In short, the new flexible furlough scheme abolishes the previous requirement for employees to be furloughed, full time, for a minimum of 3 weeks, and will allow previously furloughed employees to be brought back to work for any period of time, part time, and be furloughed for any unworked days.

Employers are still able to furlough employees full time from 1 July, but will not be subject to the 3 week minimum period, provided the new period of furlough started on or after 1 July.

Unfortunately, the reality of taking advantage of the flexible furlough scheme is not straightforward, as we set out below.

The new rules – who can claim from 1 July 2020?

From 1 July 2020, you can claim from the coronavirus job retention scheme (CJRS) for any employees you furlough if you have:

• already furloughed that employee for at least 3 consecutive weeks between 1 March and 30 June 2020 (with some exceptions such as employees returning from certain statutory leave).
• a UK PAYE scheme started on or before 19 March 2020
• enrolled for PAYE online
• submitted a report under the Real Time Information (RTI) reporting system for that employee on or before 19 March 2020
• a UK bank account

Importantly, the maximum number of employees you claim for in any single claim period starting from 1 July cannot exceed the maximum number of employees you claimed for under any single claim ending 30 June.

For example, if you have previously submitted 4 claims before 1 July, in which the total number employees furloughed in each respective claim was 10, 7, 8 and 15 employees, the maximum number of employees you could furlough at any one time, starting on or after 1 July would be 15.

What working arrangements are allowed?

From 1 July, employers can bring furloughed employees (who fulfil the criteria above) back to work for any amount of time, and on any work pattern, while still being able to claim the CJRS grant for their ‘usual’ hours not worked. Flexible furlough agreements can be entered into more than once.

The minimum 3 week period for furlough will be removed from 1 July. There will be no minimum period an employee must be furloughed for (whether flexibly or full time), although any claims on the CJRS must be in respect of a minimum one week period.

However, where a previously furloughed employee starts a new furlough period before 1 July, this furlough period must be for a minimum of 3 consecutive weeks. For example, if an employee was furloughed for 4 weeks in May, then brought back to work on June 1, and then started a new furlough period on 22 June, they must be furloughed for 3 full weeks (until 12 July) before they are able to be un-furloughed or work part time under the flexible furlough scheme.

Agreeing flexible working patterns with employees

If you take advantage of the new flexible furlough scheme, you’ll need to agree this with your employees (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement.

You’ll need to:

• make sure that the agreement is consistent with employment, equality and discrimination laws
• keep a written record of the agreement for five years
• keep records of how many hours your employees work and the number of hours they are furloughed.

That said, you can continue to fully furlough employees if you wish, under your previously agreed furlough agreement, provided that it is in writing, consistent with employment, equality and discrimination laws and you keep a written record of the agreement for five years.

When your employees are on furlough

During hours which your employee is on furlough and not working, the rules are the same as they were previously in that you cannot ask them to do any work for you, but they can undertake training or volunteer work (see section on link: ‘What is the process’?).

Claiming from the CJRS

Claim periods from 1 July

‘Claim periods’ are made up of the days you are claiming a grant for.

Claim periods starting on or after 1 July must:

• start and end within the same calendar month; and
• must last at least 7 days unless you’re claiming for the first few days or the last few days in a month.

You can only claim for a period of fewer than 7 days if the period you are claiming for includes either the first or last day of the calendar month, and you have already claimed for the period ending immediately before it.

When to claim

Furlough periods before 1 July

Any periods of furlough leave starting before 1 July must be claimed separately to any claims for periods of furlough from 1 July onwards. This is the case even where an employee furloughed in June continues to be furloughed full time in July, without a break.

You must submit separate claims in these circumstances (i.e. one claim for the period up to 30 June, and one for 1 July onwards). Claims for periods ending on or before 30 June 2020 must be made by 31 July 2020.

Furlough periods after 1 July

From 1 July, you can only make one claim for any claim period (as defined above) so you must include all your furloughed or flexibly furloughed employees in one claim.

If you claim for more than one claim period, the dates of the claim periods cannot overlap, and they must follow on from each other with no gaps in between the dates.

You can usually make your claim up to 14 days before your claim period end date and do not have to wait until the end of a claim period to make your next claim. Claims for periods of furlough commencing on 1 July can be made from 1 July.

When claiming for employees who are flexibly furloughed you should not submit a claim until you are sure of the exact number of hours work during the claim period. If you claim in advance and your employee works for more hours than you told HMRC, you will have to pay some of the grant back to HMRC.

Payments will be made 6 working days after you submit your claim.

What to include when calculating wages

If your employees remain on full time furlough, the rules about calculation remain the same (see section on link: ‘What is the process’?).

If you are flexibly furloughing employees and they are working part time, you are able to claim from the CJRS for any ‘usual’ hours not worked.

Currently, the CJRS grant is 80% of your employees’ wages or £2,500 full time equivalent per month, for hours not worked. From 1 August this will change, as explained here.

When calculating how much can be claimed, you should include the regular payments you are obliged to make, as set out in this article (see section on link: ‘What is the process’?).

Tax, pensions and national insurance

Your employees will still pay the taxes they normally pay out of their wages. This should be done through PAYE using the normal rules. You should also continue to pay their pension as previously set out.

From 1 August employers will be required to pay all employer NICs and pension contributions as we explain here.

Work out your claim

If your employee is flexibly furloughed, you will need to work out the following for each employee during any claim period:

1. their ‘usual’ hours;
2. the actual hours they work
3. the furloughed hours.

‘Usual’ hours

There are two different calculations you can use to work out your employee’s usual hours, depending on whether they work fixed or variable hours.

Fixed hours

You need to calculate the usual hours for each pay period, or part of a pay period, that falls within the claim period. To calculate the number of usual hours for each pay period (or partial pay period):

1. Start with the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.
2. Divide by the number of calendar days in the repeating working pattern, including non-working days.
3. Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.
4. Round up to the next whole number if the outcome isn’t a whole number.

If a fixed hours employee was on annual leave, off work sick or on family related statutory leave at any time during the last pay period ending on or before 19 March, the usual hours should be calculated as if the employee had not taken that leave.

Variable hours

The ‘usual hours’ for employees with flexible hours will be calculated based on the higher of either:

• the average number of hours worked in the tax year 2019 to 2020
• the corresponding calendar period in the tax year 2019 to 2020

You need to calculate the usual hours for each pay period, or part of a pay period, that falls within the claim period.

When you calculate the usual hours, you should include any hours of leave for which the employee was paid their full contracted rate (such as annual leave), and any hours worked as ‘compulsory overtime’.

To work out the usual hours for each pay period (or partial pay period) based on the average number of hours worked in the tax year 2019 to 2020:

1. Start with the number of hours worked (including paid leave) in the tax year 2019 to 2020 before the employee was furloughed, or the end of the tax year if earlier.
2. Divide by the number of calendar days the employee was employed by you in the tax year 2019 to 2020, up until the day before they were furloughed, or the end of the tax year if earlier.
3. Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.
4. Round up to the next whole number if the outcome isn’t a whole number.

Calculating the number of working and furloughed hours for each employee

Once you have established the usual working hours for your furloughed employees, you will have to calculate how much you can claim from the CJRS.

You will have agreed how many hours your flexibly furloughed employee is going to work in the claim period. They will be furloughed for the rest of their usual hours.

To calculate the number of furloughed hours:

1. Start with your employee’s usual hours for the claim period (as above).
2. Subtract the number of hours they actually worked in the claim period – even if this is different to what you agreed.
3. The answer = the number of ‘furloughed hours’ you can claim for.

You must pay the employee their contractually agreed rate for any hours they work and any agreed ‘furlough rate’ for the usual hours that they do not work.

You can then make a claim from the CJRS for the furloughed hours, subject to the maximum limits set out here.

We’re here to help

We appreciate that it is a confusing and uncertain times for employers, but we’re here to help.

Our employment law team is fully equipped to advise you on your rights and obligations in this most unusual situation and how best to implement this guidance across your workforce.

Our legal services are operating as normal, with all of our lawyers able to work safely from home.

Please call 01242 514000 or email Jenny Hawrot in our employment law team and we will be delighted to help.

We’re regularly updating our website with more COVID-19 legal insights, so keep an eye on this page for the latest legal perspectives relating to the coronavirus.