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24 June 2020
The government has published updated guidance on the Coronavirus Job Retention Scheme, setting out the pathway to its phasing out. The guidance provides details of the complex mechanism under which flexible furloughing (ie, part work, part furlough) will be allowed from 1 July 2020.
How are the rules about who can be placed on furlough changing?
It is no longer possible to add new entrants to the revised furlough scheme, with one exception (see below). Only employees previously furloughed for three weeks before 30 June 2020 can continue to be part of the scheme after 1 July 2020.
Employees need not be on furlough on 30 June 2020 to be part of the extended scheme – an employee in work at the end of June 2020 can be refurloughed so long as they have been furloughed before. However, employers which have not previously used the furlough scheme are not now able to do so.
The number of employees that an employer can claim for after 1 July 2020 cannot exceed the number in any previous claim. For example, an employer that claimed for 20 employees in April 2020, 40 in May 2020 and 30 in June 2020 cannot claim for more than 40 employees in any claim after 1 July 2020.
The only exception to the 'no new furloughs' rule is where an employee has returned from maternity or other family leave (eg, shared parental leave). After intensive late lobbying, the government has relented and will allow such individuals to be furloughed on their return.
How is the financial support available to employers changing?
This will remain unchanged until 31 July 2020, although from 1 July 2020 there are changes to the way in which claims must be made and flexible furlough will be allowed.
From 1 August 2020, the monthly cap on the furlough grant will remain at 80% of employee wages capped at £2,500, but employers must meet the cost of employer national insurance and pension contributions.
From 1 September 2020, employers must also pay 10% towards an employee's wages (resulting in the monthly cap on the furlough grant reducing to £2,187.50).
From 1 October 2020, an employer's contribution towards an employee's wages will increase to 20% (resulting in the monthly cap on the furlough grant reducing to £1,875).
The furlough scheme will end on 31 October 2020.
Are there changes to the way that employers must make a claim?
Yes, any claim in respect of the period before 30 June 2020 must be made by 31 July 2020.
In the period after 1 July 2020, a claim must start and end within the same calendar month. This is to accommodate the fact that the scheme is changing from month to month. More than one claim in each month can be made, but each claim must be for at least a seven-day period.
The only exception to the seven-day claim is if employers are making a claim for a few days at the beginning or end of a month (eg, if employers pay weekly and the month end results in a week being split across two months). In this case, employers must make two claims (one for each month).
How will flexible furloughing work?
From 1 July 2020, employees can work for some days (or part days) and be furloughed for others. For example, an employee could work on Monday and Tuesday and be furloughed on Wednesday, Thursday and Friday. The cap on the furlough grant will be proportional to the hours not worked.
There is one situation in which a 1 July 2020 start date for flexible furlough is not possible, which is where a previously furloughed employee started a new three-week furlough period after 10 June 2020. In that situation, the flexible furlough cannot start until those weeks have expired. This is most likely to affect employees who have been on a rotating furlough arrangement.
Any sort of working pattern is permitted under the flexible furlough scheme and there is no restriction on the length of time that it must last. However, if an employer wishes to agree a flexible furlough arrangement, it must enter into a new agreement with the employee. The rules about what an employee is (and is not) permitted to do during any days that they are furloughed remain unchanged.
Where flexible furlough is being used, there are additional record-keeping requirements and employers must retain (for six years) records of the usual hours worked by each employee (including details of the calculation used to ascertain usual hours) and the actual hours worked.
Flexible furlough is not compulsory and full furlough will remain available until 31 October 2020 with the required additional financial contributions.
How will employers calculate the furlough grant if they use flexible furloughing?
Although the principle of flexible furlough has generally been welcomed, the guidance sets out complex rules for calculating the amount of grant which may be claimed in these circumstances.
The calculation varies depending on whether employers have previously calculated the grant on the basis of a fixed salary or variable pay (depending on the hours worked). In each case, employers must calculate a baseline number of usual hours so that it can be compared with the actual hours worked. The government has prepared a number of examples to assist with the calculation and has updated its calculator.
The calculation complexities are compounded by the need to ensure that claims are contained within the same month and the government's advice that employers should not claim until they are sure of the exact number of hours an employee will have worked during the claim period. However, there is now a mechanism under which a claim can be corrected.
Where employers have a small number of employees that they wish to place on flexible furlough, these calculation challenges may be manageable. However, for large employers with complex staffing arrangements, it could be an extremely difficult task. This, coupled with the additional financial contributions under the furlough scheme from August 2020, might accelerate redundancy exercises – particularly those where collective consultation is required.
If there is some work available, is there a way to bring employees back and avoid the flexible furlough calculations?
It is possible to require some employees to return to work and allow others to remain on furlough. Making decisions about who returns to work can be complicated and it is necessary to ensure that this is done in a non-discriminatory way. Staffing decisions as workplaces reopen are probably the most challenging issue facing employers.(1)
Helpfully, the requirement for an employee to remain on furlough for three weeks will be removed from 1 July 2020. Therefore, employers can explore different rotated furlough arrangements such as a one-week-on/one-week-off rotation. This might help employers to be more flexible in their arrangements and fairly distribute the work that is available. However, it seems that this will not necessarily always avoid the flexible furlough calculations if an employer's claim period is not aligned with their rotation period.
What should employers be doing now?
Employers – particularly those benefiting from the easing of restrictions – should carefully consider what their staffing requirements will be from 1 July 2020 and how they will affect currently furloughed employees:
For some employers, the cost and complexity of the extended furlough scheme may mean that they must accelerate redundancies and restructuring, in which case it will be important to start planning and seek appropriate advice. In many cases, employers will be undertaking collective consultation for the first time and it is crucial to get it right.(2)
For further information on this topic please contact Lucy Lewis at Lewis Silkin by telephone (+44 20 7074 8000) or email (email@example.com). The Lewis Silkin website can be accessed at www.lewissilkin.com.
(1) A flowchart with further information is available here.
(2) Further information is available here.
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