Preparing for the end of the Furlough Scheme & some frequently asked questions
Following on from our last article “Are You Ready For The Furlough Scheme Changes?” the government finally provided the further detailed guidance late on the evening of 12 June.
There were a few surprises in the guidance and it is worth reading all of the documentation particularly around how to calculate claims for staff who have agreed to be flexibly furloughed.
However a summary of the latest developments are:
- The Scheme will close as planned on 31 October 2020 and we are informed it will not be extended or replaced.
- It is now too late to put employees on furlough for the first time unless they are returning from maternity or other family leave.
- From 1 July employees can be moved onto a flexible furlough arrangement. Effectively this means they can work part time in any pattern. When working employees will be paid their normal wage whilst they will receive the furlough grant for the remainder of their usual working hours.
- From 1 August employers will be required to contribute employer national insurance and pension contributions.
- In September employees will also be required to contribute 10% of wages and the government will contribute 70%.
- From October the employer contribution increases to 20% and the government will contribute 60%.
- All claims for the period ending 30 June must be completed by Friday 31 July.
- Claims for the period from 1 July cannot be made until 1 July and it is worth noting that claims cannot straddle two calendar months.
- As an anti-abuse measure the government have also stated that the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim.
Questions have been flooding in thick and fast and we have set out a few of the most common below.
Are we allowed to re-furlough employees who are currently back at work?
Yes provided they were previously furloughed for at least three weeks at any time between 1 March and 30 June.
Does a period of furlough still need to last at least three weeks?
Previously employees must be furloughed for a minimum of three weeks and claims made via the portal must also have been made for a minimum of three weeks. This remains the case for periods which began before 1 July. However from 1 July there is no minimum period that an employee must be on furlough. However any claim through the portal needs to cover at least one week unless you are claiming for the first or last few days in a month.
What if we cannot afford to start making contributions from 1 August?
The increased employer contributions are obligatory if you are claiming the grant. As a result if you cannot make the contributions you will need to remove employees from furlough and consider alternative options such as redundancies or agreeing new terms and conditions.
Can we make employees redundant whilst still on furlough and carry out consultation about this?
Yes. The employee guidance is clear that the employer can still make you redundant whilst you are on furlough and afterwards. It is also possible that notice can be given while furloughed. However it is worth noting that the grant cannot fund any redundancy payment itself.
How do we put an employee on flexible furlough?
The guidance is clear you need a written agreement to do so. This agreement should cover the hours they will be working and the hours that they will be furloughed.
Behind the scenes you will also need to ensure you have the administration in place to calculate the hours worked and not worked and what you are entitled to claim.
Do we have to move furloughed employees to flexible furloughing?
No. Flexible furloughing is an option and you are entitled to leave employees on furlough subject to the terms of any agreement with them and meeting the increasing costs as set out above.
What can we claim for an employee on flexible furlough through the scheme?
You will be able to claim a grant for the hours your employees are not working calculated by reference to their usual hours worked in any claim period. The grant and cap will be reduced in proportion to the hours not worked. For example, an employee is entitled to 50% of the cap if they are furloughed for 50% of their usual hours.
How do we know what an employee’s usual hours are?
For employees with fixed hours you start by calculating the usual working hours for the period you are claiming for and these are the hours they were contracted for at the end of the last pay period ending on or before 19 March 2020.
For employees who worked variable hours the usual hours is not based on the hours you predict they would have worked in the claim period nor can you simply agree them with the employee. Instead you have to calculate usual hours by looking backwards at the usual hours they worked last year. This will either be based on the higher of the average number of hours worked in the tax year 2019 to 2020 or the corresponding calendar period in the tax year 2019 to 2020.
As mentioned these calculations can be complicated and HMRC has produced examples of how to do it which we recommend you look at!
Is it possible to implement pay cuts for employees brought back on flexible furlough as we had implemented pay cuts for staff not furloughed?
It seems so! Nothing in the guidance suggests that you are not able to do this but of course you would need to agree those pay cuts with the employees. However it is worth noting the grant relates for hours not worked is based on pre-furlough pay.
Where can I get a flexible furlough agreement template?
Just give one of the team a call or email and we would be happy to help.
If you have any other questions or we can assist the Employment Team would be delighted to speak to you.