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COVID-19 FURTHER UPDATE: REVISED FURLOUGH SCHEME (19 June 2020)

COVID-19 FURTHER UPDATE: REVISED FURLOUGH SCHEME (19 June 2020)

Martin Stephen

Published by
Martin Stephen

19th June 2020

The Government has published updated Guidance on the CJRS setting out the pathway to phasing out the Scheme and providing details of the complex mechanism under which flexible furloughing allowing part-time work will be allowed from 1 July 2020.

The revised Furlough Scheme can be found here:
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

How are the rules about who can be placed on furlough changing?
With one exception, it is no longer possible to add new entrants to the CJRS. Only employees previously furloughed for three weeks before 30 June can continue to be part of the Scheme after 1 July.

Employees need not be on furlough on 30 June itself to be part of the extended Scheme. An employee in work at the end of June can be re-furloughed so long as they have been furloughed before. However, employers which have not previously used the Furlough Scheme will not now be able to do so.

The number of employees an employer can claim for after 1 July cannot exceed the number in any previous claim. For example, an employer that has claimed for 20 employees in April, 40 in May and 30 in June will not now be able to claim for more than 40 employees in any claim after 1 July.

The only one exception to the rule against new furloughed employees is where an employee has returned from maternity or other family leave, for example shared parental leave.

How is the financial support available to employers changing?
This will remain unchanged until 31 July 2020, although from 1 July there are changes to the way in which claims must be made and flexible furlough will be allowed.

From 1 August 2020 the monthly cap on the furlough grant will remain at 80% of employee wages capped at £2,500 but employers will be required to meet the cost of employers’ NICs and pension contributions.

From 1 September 2020 employers will also have to pay 10% towards an employee’s wages (resulting in the monthly cap on the furlough grant reducing to £2,187.50).

From 1 October 2020 an employer’s contribution towards an employee’s wage will increase to 20% (resulting in the monthly cap on the furlough grant reducing to £1,875).

The Furlough Scheme will end on 31 October 2020.

Are there any changes to the way we need to make a claim?
The answer to this is yes. Any claim in respect of the period before 30 June must be made by 31 July 2020.

In the period after 1 July 2020, a claim must start and end within the same calendar month. This is to accommodate the fact that the Scheme is changing from month to month. It is possible to make more than one claim in each month, but each claim must be for a period of at least 7 days.

The only exception to the 7-day claim is if you are making a claim for a few days at the beginning or end of a month (for example if you pay weekly and the month end results in a week being split across two months). There you will need to make two claims (one for each month).

How will flexible furloughing work?
From 1 July it will be possible to allow employees to work for some days (or part of days) and be furloughed for others. For example, an employee could work on Monday and Tuesday and be furloughed on Wednesday, Thursday and Friday. The cap on the Furlough Grant will be proportional to the hours not worked.

There is one situation in which a 1 July 2020 start for flexible furloughing is not possible, which is where a previously furloughed employee started a new three-week furlough period after 10 July. In that situation, the flexible furlough cannot start until those weeks have expired. This is most likely to impact employees who have been on a rotating furlough arrangement.

Any sort of work pattern is permitted under the Flexible Furlough Scheme and there is no restriction on the length of time it must last. If an employer wishes to agree a flexible furlough arrangement, however, it must enter into a new agreement with the employee. The rules about what an employee is (and is not) permitted to do during any days they are furloughed remain unchanged.

Where flexible furloughing is being used, there are additional record keeping requirements and employers are required to retain (for 6 years) records of the usual working hours worked by employees (including details of the calculation used to ascertain usual hours) and the actual hours worked.

Flexible furlough is not compulsory and full furlough will remain available until 31 October with the required additional financial contributions.

If there is work available, is there a way to bring employees back and avoid the flexible furlough calculations?
Helpfully, the requirement for an employee to remain on furlough for three weeks is being removed from 1 July.

This means that an employee could explore different rotated furlough arrangements which would not require the calculation of usual hours that is a critical component of the Flexible Furlough Scheme. For example, an employer could consider a “one week on/one week off” rotation. This might help employers to be more flexible in their arrangements and fairly distribute the work that is available.

It is also possible to require some employees to return to work and others to remain on furlough. Making decisions about who returns to work can be complicated and it is necessary to ensure you do so in a non-discriminatory way. Staffing decisions as workplaces reopen are probably the most challenging issue facing employers.

If we cannot afford the contributions under the Extended Furlough Scheme, can we make redundancies?
The answer to this is yes and we would direct you to our Guidance on Redundancy and Guidance on Collective Redundancies which are available on request.

What should employers do now?
Employers, particularly those benefitting from the easing of restrictions, should give careful consideration to what their staffing requirements will be from 1 July and how that will impact the employees they currently have on furlough:-

• Employers who intend to keep employees on full furlough will need to review their existing arrangements to see whether any further arrangement is required and whether employees will need to be notified of their intention to extend furlough. If you offer a “top-up” you may also need to consider whether it is affordable to do so on an extended basis (particularly as you will be required to contribute more to the Scheme);

• If you are going to use the Flexible Furlough Scheme you need to put in place a new general agreement to take on board the time it will take to work through the complex calculation requirements. Also remember there are new record-keeping requirements in the circumstances;

• If alternative arrangements (for example new furlough rotations) are to be put in place, this will most likely need a new agreement; and

• If you intend to bring some employees back from furlough, you should start thinking about how you will decide who to bring back and ensure you communicate with all of the employees in good time.

In closing
For some employers the cost and complexity of the Extended Scheme may mean that they need to accelerate redundancies and restructure, in which case it is important to start planning and to seek appropriate advice. In many cases employers will be undertaking collective consultation for the first time and it is crucial to get it right.

Please remember that we at WJM are here to help during this exceptionally difficult time, please don't hesitate to get in touch if there is anything you think we can help with.

For any advice in relation to any particular aspects of the above, please contact a member of the Wright, Johnston & Mackenzie Employment Team: Martin Stephen (mss@wjm.co.uk), Liam Entwistle (lae@wjm.co.uk), Andrew Wilson (ajpw@wjm.co.uk) and John Grant (jg@wjm.co.uk).

The information contained in this newsletter is for general guidance only and represents our understanding of relevant law and practice as at June 2020. Wright, Johnston & Mackenzie LLP cannot be held responsible for any action taken or not taken in reliance upon the contents. Specific advice should be taken on any individual matter. Transmissions to or from our email system and calls to or from our offices may be monitored and/or recorded for regulatory purposes. Authorised and regulated by the Financial Conduct Authority. Registered office: 302 St Vincent Street, Glasgow, G2 5RZ. A limited liability partnership registered in Scotland, number SO 300336.