On 29 May we learnt that flexibility was to be introduced into the Coronavirus Job Retention Scheme (CJRS) from 1 July. Additional details on how this will work in practice were published on 12 June. This introduces a whole new set of rules around furlough that will apply after 1 July, which is important for all employers to understand, irrespective of whether you are intending to make use of the flexibility.

What are the essential points?

  • No new people can be furloughed now. From 1 July you can only furlough and claim for those that have already been furloughed for a minimum period of 3 consecutive weeks between 1 March and 30 June.
  • The only exception is those returning from family friendly leave after 10 June (such as maternity/paternity but also including parental bereavement leave). They can still be furloughed provided that the employer has made a furlough claim for any other employee in the organisation, the family leave started before 10 June and the employee was on a RTI submission on/before 19 March 2020.
  • The amounts that can be claimed from the Scheme are reducing over a period until it ceases on 31 October 2020. The cost to you will therefore be increasing. For details see here and the summary below.
  • You cannot now claim in any one claim for more people that you have claimed for in any one previous claim prior to 30 June. Those returning from family friendly leave and being furloughed for the first time are added to the total number of that one previous claim.
  • The earliest you can claim for furlough grants relating to July is 1 July – no sooner.
  • From 1 July you cannot make claims that cross calendar months or overlap. The minimum claim period is 7 days unless you are claiming for the first few or last few days of the month and you have already claimed for the period ending immediately before it.
  • You can continue to fully furlough employees if you wish. This could be where you simply don’t have the work yet. This is also still appropriate for those who are shielding, self-isolating or who have caring responsibilities.
  • During the time the person is recorded as furloughed they cannot undertake any work for you or for any other associated or linked business. Employees can still (if their contract allows) take up new employment while furloughed, provided they are able to come back to work if the furlough ends or you want to start flexible furlough.
  • Holiday is treated as before. For our previous guidance on how to treat holiday see here.
  • After you have claimed you must tell your employees that you have made a claim and that they do not need to take any more action. This is a new requirement.
  • If you have made an error in a claim that has resulted in an over-claimed amount, you must pay this back to HMRC. You can do so as part of your next claim, which is helpful as it will be easy to get this wrong given the complexities.
  • Our Key Questions Answered article remains correct for the furlough scheme up to 1 July. Do be aware however that you must make your claim for any person furloughed in the period up to 30 June by no later than 31 July 2020.

How will what can be claimed change?

  • There are no changes to what can be claimed under the CJRS for a fully furloughed employee until 1 August.
  • From 1 August, employers will no longer be able to claim for employer National Insurance contributions or employer pension contributions. The amount of wages that can be claimed under the CJRS will remain at 80% (maximum wage amount of £2,500).
  • From 1 September, employers will have to pay 10% of any time for which an employee is furloughed; they can claim 70% through the CJRS (maximum wage amount of £2,187.50).
  • From 1 October, employers will have to pay 20% of any time for which an employee is furloughed; they can claim 60% through the CJRS (maximum wage amount of £1,875).
  • Note: wage caps are proportionate to the number of hours an employee is furloughed, i.e. an employee who is furloughed for 60% of their usual hours is entitled to 60% of the maximum furlough wage amount.
  • It remains an employer’s choice whether or not to top up pay for any time spent on furlough.
  • Employers must pay employees their full salary for any time worked.
  • Subject to any changes to the CJRS, all payments under it will cease from the end of October.

How might flexible furlough from 1 July work?

  • You can bring employees back to work for any amount of time, and any shift pattern.
  • You no longer have to have the minimum 3 week period, except where a previously furloughed person starts a new furlough period before 1 July, when it must be for a minimum of 3 weeks (even if it then ends after 1 July).
  • Flexible furlough agreements can last for any amount of time and employees can enter into a flexible furlough agreement more than once.
  • You can still claim the furlough grant for the hours your flexibly furloughed employees do not work, compared to usual hours they would have worked in that period.
  • You need to have agreed a flexible furlough arrangement with the employee (or reached a collective agreement with a trade union) and keep a written agreement that confirms the furlough arrangement. We can provide template documents for this – please ask.
  • You must keep an accurate record of how many hours your employee works and the number of hours they are furloughed. This will be needed for your claim.
  • You must still be careful around employment rights, equality and discrimination law, so ensure that your decisions on who to bring back are fair and justified relating to work need. It may be sensible to use a scoring matrix to choose if you have more than one person who is able to do the work available – if you need a template, please ask.
  • The relevant records should be kept for 5 years.
  • Given that the hours your employees work may change, it is best to delay your claim until you are sure of the exact number of hours they have worked in the claim period. If your employee works more hours that you have said you will need to pay some of the grant back.

How do you calculate your employee’s usual hours?

Where the person works variable hours (either as they are not contracted to a fixed number of hours or their pay depends on the number of hours they work) you should use the higher of either the average number of hours worked in the tax year 19/20 or the corresponding calendar period in the tax year 19/20. Note:

  • You need to calculate the usual hours for each pay period or part of a pay period that falls within the claim period.
  • You should include any hours of leave which the employee was paid their full contractual rate (such as holiday) and any hours worked as ‘overtime’ but only if the pay for those hours was not discretionary – i.e. you were contractually obliged to pay a set rate for the overtime worked.
  • Since April 2019 you should have shown the number of hours worked on your employee’s payslips, so hopefully you have records of these hours.

Where a person is contracted to work for a fixed number of hours or don’t fall into the category above, you should use this calculation:

  • Start with the hours your employee was contracted for at the end of the last pay period on or before 19 March 2020.
  • Divide by the number of calendar days in the repeating work pattern, including non working days (such as weekends).
  • Multiply by the number of calendar days in the pay period (or partial pay period you are claiming for).
  • Round up to the next whole number.

Note: If your employee was on annual leave, sick leave or family leave at any time in that period, calculate this as though the employee had not taken that leave.

Detailed guidance on steps to take before calculating a claim under the CJRS is found here. There are also useful examples on the calculations needed set out by the Government guidance here.

This is complex so do seek assistance from us or your accountants on the calculations if needs be and regularly check the Gov.uk website which is being updated most days.

Do also check our Covid-19 Insights Hub for other useful information relevant to businesses and individuals.