Flexible Furlough

Date: 23rd June 2020

On Friday 12 June, HMRC updated their guidance on the Coronavirus Job Retention Scheme to reflect the forthcoming changes to the scheme to allow flexible furlough.

But do you know what this means for your business and employees? The main points from the updated guidance on how the scheme will work until it comes to an end in October.

Timetable of the changes

From 1 July 2020, employers can bring furloughed employees back to work for any amount of time and still claim the furlough grant for the difference between the hours they would normally have worked, and the hours actually worked.

From 1 August 2020, the maximum amount which can be claimed under the scheme each month will reduce to reflect the financial contribution employers will have to start making from this date.

1st July – Introduction of flexible furlough, financials unchanged

1st August – Employers start to pay Employer’s National Insurance Contributions and pension contributions. 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 Employer’s National Insurance Contributions and pension contributions for the hours the employee is on furlough.

1st September – Employers pay Employer’s National Insurance Contributions and pension contributions plus 10% of wages. 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 Employer’s National Insurance Contributions and pension contributions and top up the employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for the time they’re furloughed.

1st October – Employers pay Employer’s National Insurance Contributions and pension contributions plus 20% of wages. 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 Employer’s National Insurance Contributions and pension contributions and top up the employee’s wages to ensure they receive 80% of their wages up to a cap of £2,500, for the time they’re furloughed.

31st October – The scheme will close.

Minimum periods of furlough

Currently, employees must be furloughed for a minimum period of three weeks. From 1 July this is abolished and there will be no minimum period of furlough.

At present, when an employee returns to work, their period of furlough comes to an end and they must agree to be put back on furlough if needed.

From 1 July, you can enter into a flexible furlough agreement with an employee which can last any amount of time.

Calculating the number of furloughed hours for each employee

The number of furloughed hours will be the employee’s usual hours for the claim period less the number of hours actually worked (or expected to be worked).

For employees on set hours, their usual hours will be those they were contracted to work in the pay period immediately on or before 19 March 2020.

For employees on variable hours, the starting point will be the higher of either their average hours worked over the 2019/2020 tax year or the hours worked in the corresponding calendar period in the 2019/2020 tax year.

Important to Remember

All furlough-related documentation must be retained for at least six years. For employees on flexible furlough, this will include records of the hours actually worked and the calculations used to determine the employee’s usual hours of work.