Further guidance on the future of the Coronavirus Job Retention Scheme (CJRS) was released on Friday, 12th June 2020 which provides more detail on the 'flexible furlough' scheme that was announced at the end of May. So how will it work? What do employers need to consider? In this article our employment team outline the key changes.
As we know, the CJRS has been extended to the 31st of October 2020 (with changes from July) at which point it will come to an end. The CJRS has also now closed for new employees (other than those on statutory parental leave), with the 10th of June being the last day that employers could place new employees on furlough (as they must be on furlough for at least 3 continuous weeks by 30th June- the 'closing date').
So what are the changes to the scheme between now and the end of October 2020?
- Until the end of June the scheme will continue in its current form.
- From the 1st of July, the scheme will only be open to employers who have already used the scheme for employees who have already been furloughed. These employees can have been furloughed (for a minimum of 3 weeks) from any time between 1st March and 30th June.
- The new guidance specifies that the number of employees an employer may include in any claim under the CJRS after the 1st of July must not exceed the maximum number of employees included in any claim prior to that date. Again, the only exceptions are employees returning from statutory parental leave who may be added to this maximum figure.
- The introduction of flexible furlough from 1st of July.
- For August, the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
- For September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees' wages to ensure they receive 80% of their wages up to a cap of £2,500 for the time they are furloughed.
- For October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees' wages to ensure they receive 80% of their wages up to a cap of £2,500 for the time they are furloughed.
What is flexible furlough?
Whilst it has always been a hard rule of furlough that employees cannot do any work for their employers whilst being on furlough, the new concept of 'flexible furlough' changes this approach. It means that employers can bring back furloughed employees for any amount of time and any work pattern, whilst still being able to claim for the hours not worked. This remedies one of the strongest criticisms against the furlough scheme (that it disincentivised employers from keeping businesses open) given the increased focus on getting employees back to work; and while it makes practical sense, the practicalities of the calculations involved may deter employers from electing to use the flexible furlough scheme.
Process for placing employees on flexible furlough
If you flexibly furlough employees, the guidance makes clear that you'll need to agree this with the employee (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement. You'll need to:
i) make sure that the agreement is consistent with employment, equality and discrimination laws;
ii) keep a written record of the agreement for five years;
iii) keep records of how many hours your employees work and the number of hours they are furloughed (i.e. not working).
As this will be considered a variation (temporary) of the employee's contract, you will need to consult with the employee and obtain their consent to the changes. Our employment team will be able to provide you with step by step guidance on varying an employee's contract (firstname.lastname@example.org)
Calculating the amount to claim for flexi furlough
As mentioned above, due to the nature of furlough, the amount to be claimed for flexible furlough is complex and involves different calculations for each employee. Essentially, an employer can claim under the CJRS for a pro-rata amount of 80% of an employee's salary, based on the proportion of the employee's normal hours that they have not worked.
For September 2020, the Government will cover 70% of wages up to a cap of £2,187.50 per month. Employers will have to pay the additional 10% of wages to make up a total of 80% up to a cap of £2,500 per month. For flexible furlough, the government grant will be prorated to reflect the proportion of hours the employee is on furlough compared to their usual hours.
For October 2020, the Government will cover 60% of wages up to a cap of £1,875 per month. Employers will have to pay the additional 20% of wages to make up a total of 80% up to the cap of £2,500 per month. For flexible furlough, the government grant will be prorated to reflect the proportion of hours the employee is on furlough compared to their usual hours.
This isn't too complex for those with fixed hours/pay (salaried employees). However, for those with variable hours (such as zero hours employees or those that do shift work) the baseline will be the higher of the average number of hours worked in the tax year 2019-20 or the hours worked by the employee in the corresponding calendar period of last year.
The 'cap' will also be pro-rated based on the hours not worked, so for example, if an employee is working 70% of their normal hours, up to 30% of the cap will be recoverable.
Other considerations to think about now
Given the length of time the furlough scheme has been ongoing, employers should consider carrying out a review of staff members on furlough and the impact of this on other members of staff (if only part of your workforce has been furloughed). Assuming that an employer decides to retain employees on furlough then who it keeps on furlough might be determined simply by the ongoing impact of the pandemic on its business. For example, where it has closed a department and there is still no work for those employees to do.
However, there may be other circumstances where a review of who is on furlough and who is working might be recommended. For example, where it has a reduced demand and so half a department (who normally do the same jobs) are working and half are on furlough.
Employers may wish to consider flexible furlough in circumstances where:
- some employees who have been working may have been unable to take annual leave due to a reduced workforce;
- some employees who have been furloughed may be happy to stay on furlough, whilst others may want to get back to work (and back to full pay).
The longer the period for which the employer uses the scheme and don't consider the impact on employees (either those who have been working and wanted to go on furlough, or those on furlough who want to come back to work), there may be scope for employees to argue that the employer's failure resulted in a breach of trust and confidence in their case. Communicating with employees and potentially using flexible furlough to ease the burden on employees will either avoid disputes or put an employer in the best position to explain their decision-making as to which employees were put on furlough in response to any claim an employee may bring.
Employers should also consider which members of staff they ask to return from furlough leave (even if on a flexible basis) and whether there are any factors to consider such as child care difficulties or underlying health conditions, for example.
Employers who need to consider making redundancy exercises as a result of the increased cost of or the end of furlough will need to ensure they think ahead, particularly if the number of potential redundancies exceeds 20 (triggering the obligation to collectively consult which comes with minimum collective consultation time limits). Our recent article provides more information about redundancy and other cost saving measures/alternatives click here