The New Flexible Furlough Scheme: Your Questions Answered
As Lockdown restrictions continue to loosen, the Government has outlined a new flexible furlough scheme due to begin on 1st July 2020. Details of this new initiative, which forms part of the Coronavirus Job Retention Scheme, has been communicated in the form of updates to the current Government guidance.
For employers, it is crucial to understand what this means for you, your business, and your employees. To support you in navigating the new flexible furlough scheme, we have provided answers to a number of frequently asked questions regarding this, as well as an outline for the upcoming changes employers can expect in the next few months.
What is the new flexible furlough scheme?
As part of the new flexible furlough scheme, eligible employees will be able to return to work from 1st of July for any amount of time and on any pattern of work. Employers will then be able to claim a grant for hours not worked, which will be based on the employees usual working hours minus the hours they actually worked.
This means that an employee can attend work flexibly in line with business needs. For example, initially an employee may only be required to attend work for 3 days out of 5. If this is the case, an employer can furlough them for the remaining 2 days. However, should the workplace become busier and the same employee be required for 4 days out of 5, this can be accommodated, and the employee furloughed for only 1 day for that time period.
Who is eligible for the flexible furlough scheme?
For an employee to be eligible for the flexible furlough scheme, they must have been furloughed for at least 3 consecutive weeks between 1st March – 30th June 2020. Exceptions to this apply to employees who are returning to work following maternity leave, shared parental leave, adoption, paternity or parental bereavement leave.
Are there limits on how many people can be furloughed under the new scheme?
There are limits on how many people can be furloughed under the flexible furlough scheme. The guidance states that an employer cannot furlough any more employees under the new scheme than were claimed for in any claim period prior to 1st July 2020.
This has the potential to impact some employers more than others. For example, an employer who has furloughed their staff on a rotational basis (for example 100 employees furloughed in April and a different group of 100 staff in May) cannot furlough 200 staff under the new scheme. Instead, they would be limited to 100 flexibly furloughed employees.
What are the claim periods for the new scheme?
All furlough claims for the old scheme (periods ending on or before 30th June 2020) must be submitted on or before 31st July 2020.
Under the flexible scheme, claims can only be submitted within a calendar month. For example, if you have an employee who is furloughed across June and July, separate claims must be made for each month.
As well as this, all claim periods must last at least 7 days, and all furloughed staff must be included in one claim, regardless of whether they are paid at different times. The Government recommends that employers match their claim period to the date payroll is processed, if possible.
How do I work out employee pay under the new scheme?
If an employee continues to be fully furloughed after 1st July 2020, the amount they are to be paid will be based on the same rules as before. That being said, employer contributions will increase from 1st August as Government contributions are scaled back.
To work out pay under the new scheme it is necessary to work out an employee’s ‘usual hours’ (prior to 19th March 2020) and then deduct the number of hours they worked in the claim period. The difference between the two is what can be claimed under the flexible furlough scheme.
In some cases, working out historical hours or ‘usual working hours’ can be a complex process. Therefore, it may be beneficial to seek professional help from an accountant or payroll provider with this prior to making a claim.
How do I go about agreeing flexible furlough arrangements with employees?
A critical feature of the new scheme is that an employer needs to set out a written agreement regarding flexible working arrangements with employees. This agreement must also show evidence of an employee’s agreement.
It is critical that employers seek assistance and support from HR or employment law professionals to ensure all requirements and obligations are met prior to using the scheme after 1st July 2020.
How are government contributions set to change in the future?
As time goes on both government and employer contributions are set to change under the furlough schemes. Below is a timeline of what to expect on a month by month basis.
In July 2020, contributions will remain the same from both the Government and an employer. That is, 80% of an employee’s wages up to £2,5000 per month pro rata) will be paid by the Government along with any National Insurance contributions and pension costs.
For employees furloughed under the new flexible scheme, employers should pay them for the hours they do work along with the 80% contribution for the hours they are flexibly furloughed.
Government and employer contributions – Month by Month
From August 2020 the Government will no longer make contributions towards the employer NIC and pension costs. These contributions will once again become the responsibility of the employer.
From 1st September 2020 Government contributions will reduce to 70% of an employee’s wages (up to £2,187.50 per month pro rata).
Employers will be responsible for paying staff for the hours that they work, as well as 80% of their ‘usual wages’ (up to £2,5000 per month pro rata) for the furloughed hours. Employers NIC and pension costs will also be made by the employer.
From 1st October 2020 Government contributions will further reduce to 60% of an employee’s wages (up to £1,875 per month pro rata) relating to their furloughed hours.
Employers will be responsible for paying staff for the hours that they work, as well as 80% of their ‘usual wages’ (up to £2,500 per month pro rata) for the furloughed hours. Employers NIC and pension costs will also be covered by the employer.
When is the furlough scheme scheduled to end?
Originally, the furlough scheme was set to end on May 31st, 2020. However, this was further extended until the end of October 2020.
As outlined above, changes to the furlough scheme will continue to happen over the next few months as the Government ‘winds down’ the Coronavirus Job Retention scheme.
What are the best next steps?
For employers, it is vital that careful consideration is given to staffing requirements from 1st July. Consideration should also be given to the impact these changes will have to employees who are currently furloughed.
For many, the intricacies of these changes may seem complex and difficult to navigate – particularly in these challenging times.
Should you need any support in this, please feel free to contact us. Our employment law specialists would be happy to advise you on the best course of action as the flexible furlough scheme comes into effect.