Last Updated 16th June 2020
To view more information on the Coronavirus Job Retention Scheme and FAQs view our guide.
The UK Government has published revised guidance which contains detailed advice on how the Coronavirus Job Retention Scheme is to change over the next four months before being phased out by the end of October 2020 and the mechanics of making a “flexi-furlough” claim from the 1st July 2020.
It is important that this be done accurately as HMRC have restated their intention to carefully audit claims made and to take recovery steps for employers who have claimed too much, with possible criminal sanctions for fraudulent claims.
The in’s and out’s of making claims and calculating pay etc is becoming increasingly complex. We have put together this article to highlight what you need to know, what are the risks and potential challenges and the first steps to take as an employer.
What are the changes to the Coronavirus Job Retention Scheme and Furlough arrangements?
The deadline to begin furloughing an employee was the 10th June as the requirements from the Government for furloughing employees was that they be furloughed for a minimum of three weeks before the 30th June. However, there are exceptions for those returning from maternity or shared parental leave - these employees will be allowed to be furloughed upon their return to work.
From the 1st July 2020 the maximum number of employees that an employer can furlough cannot exceed the highest number of employees furloughed by the employer in a previous claim. For example if the employer furloughed 20 people in April and 15 people in May, the maximum number of employees that can be furloughed from 1st July 2020 would be 20 employees.
Employees currently on furlough will – from the 1st July 2020 – be allowed to return to work for any amount of time or work pattern and be placed on “Flexible Furlough”. (The rules mentioned above will still apply to these individuals). Prior to the 1st July claims need to be made for at least 3 weeks of furlough, after this date flexi-furlough periods may be for any duration.
How much can I claim from the 1st July and what are my obligations?
The financial support offered from the Government as part of the Coronavirus Job Retention Scheme will remain the same until the 31st July and employers can continue to claim employers national insurance contributions and auto-enrolment pension contributions. However, this will change from the 1st August.
Claims made for those on flexi-furlough will be for the difference between 80% of pay for normal hours and actual pay for hours worked – subject to the monthly limit of £2500.
From the 1st August, the monthly limit of £2500 will remain but employers national insurance contributions and auto-enrolment pension contributions will need to be paid by the employer and may no longer be claimed under the scheme.
From the 1st September, the Government subsidy will reduce to 70% of salary, meaning the maximum pay recoverable will reduce to £2187.50.
From the 1st October, the Government subsidy will reduce to 60% of salary, meaning the maximum pay recoverable will reduce to £1875.00.
The Coronavirus Job Retention Scheme will cease on the 31st October 2020.
How will the way I claim change from the 1st July?
Claims made for the period before 30th June will need to be made by 31st July 2020. From the 1st July 2020 the furlough scheme will change to monthly claim periods, meaning employers will need to make a claim that starts and ends in the same month. Each claim must be for at least a seven day period and multiple claims can be made within the same calendar month.
Where an employee is for example paid weekly and the last week of the month falls into the next month, this will be exempt from the 7 day rule and you will need to make a claim for each month.
How do I ‘flexi-furlough’ employees?
Employees currently on furlough (or those who have previously been furloughed for at least three weeks during the period 1 March to 30 June 2020) will – from the 1st July 2020 – be allowed to return to work for any amount of time or work pattern and be placed on ‘flexi-furlough’. Claims made for employees who are ‘flexi-furloughed’ will be for the difference between 80% of pay for normal hours and actual pay for hours worked subject to the maximum limits detailed above.
Employee agreement to ‘flexi-furlough’ must be obtained and evidenced in writing and the employer will need to keep records of the ‘normal hours’ worked by the employee, the actual hours worked and details of how the ‘normal hours’ were calculated for six years.
There are complicated rules for working out ‘normal hours’. Broadly:
- For employees with fixed hours this will be pay in the last pay period before 19th March 2020.
- For employees with variable pay/hours this will be the higher of pay in the period 12 months before the claim and average pay over the past 12 months.
As ‘flexi-furlough’ can be for any period, claims are to be calculated by daily rates. The same rules as before apply to which pay can be included in a claim. This covers only basic salary and any additional non-discretionary payments; discretionary elements and benefits cannot be included.
The Government has provided a number of examples to aid you in calculating ‘normal hours’ and claim amounts. They have also updated their calculator.
What should I do now?
The changes from the 1st July will greatly benefit some companies, especially those who are able to begin operating again following the easing of lockdown restrictions. However, the changes could also present some complex operational planning.
- Employers should consider who from their workforce are already on furlough and if they intend to extend furlough or place the employee on ‘flex-furlough’ they must obtain written agreement from the employee.
- Employers planning to take advantage of the ‘flexi-furlough’ scheme should enlist expert support or advice to aid them in overcoming the complexity and time-consuming process of calculations and gaining new written agreements for employees to enter this scheme. To hear more about how Abbiss Cadres LLP can help click here.
- Employers must decide whether the cost and intricacy of the extended furlough scheme is such that they should instead consider restructuring or redundancies. As above, if this is the case, employers should enlist expert advice and consultancy as it is vital that collective consultancies are handled and managed in the right way.
Our COVID-Team can help you through what is a complex process. We offer a dedicated, multi-disciplinary team to help employers and businesses navigate the challenges they are currently facing and those that lie ahead. Get in touch with us to find out more about the ways we can help.