LawFlash

Coronavirus Job Retention Scheme Will Be More Flexible From 1 July: What It Means for UK Employers

June 16, 2020

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.

KEY CHANGES TO 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).

PRACTICAL POINTS

Employers should consider the following key practical points:

  • Timing of claim. 31 July is the last day that employers can submit claims for the pay period ending on or before 30 June. Employers will be able to make claims from 1 July but they cannot make claims that cross calendar months.
  • Claim period. Claim periods must last at least seven days. Employers can only claim for a period of fewer than seven days if the period includes either the first or last day of the calendar month, and employers have already claimed for the period ending immediately before it.
  • Calculating flexible furlough payments. Wage caps will be proportionate to the hours for which an employee is furloughed. For example, an employer can claim for furlough salary of 60% of the £2,500 cap if the employee is furloughed for 60% of his/her usual hours and works for 40% of his/her hours from 1 July.
  •  Agreement. Employers will need to reach agreement to the new flexible furlough arrangement with employees (or reached a collective agreement with a trade union or other employee representation body) and keep a written record for five years. Employees do not have to provide a written response but, practically, they should be asked to signify their consent in writing. Employers will also need to keep a record of the usual hours worked and actual hours worked for six years.

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

HOW TO CALCULATE THE FLEXIBLE FURLOUGH PAYMENT

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:

  1. 80% of usual wages or maximum wage amount £2,500; MULTIPLIED BY
  2. the employee’s furloughed hours; DIVIDED BY
  3. the employee’s usual hours.

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.

PARENTS RETURNING TO WORK AFTER EXTENDED LEAVE

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.

CONSIDERATIONS FOR EMPLOYERS

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.

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CONTACTS

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
Pulina Whitaker
Louise Skinner
Lee Harding

Trainee solicitor Sol Gelsomino contributed to this article.