Flexible Furlough – FAQs
Following the announcement of the Government on 31 October 2020, the Coronavirus Job Retention Scheme (CJRS, or furlough scheme) has been extended to March 2021. Updated guidance dealing with the extension of the Coronavirus Job Retention Scheme (CJRS, or furlough scheme) has now been published. This post specifically relates to claims for periods ending on or before 31 October 2020. For claims for periods that start on or after 1 November 2020, see our separate post here.
On 29 May, the Government announced changes to the Coronavirus Job Retention Scheme (CJRS) that apply from 1 July 2020. The announcement introduced a new system of flexible furlough, which allows employees who have been furloughed to return to work on a part time basis. The Government has updated the online guidance to refer to the flexible furlough scheme. Links to Government guidance are set out at the end of this post.
This post relates to the new system of flexible furlough which takes effect from 1 July 2020. For information about the original CJRS, see our previous post here. For information on other implications of Coronavirus on the employment relationship, see our post here.
What are the key changes to the CJRS?
Under the original CJRS, employees who have been furloughed must not work for their employer during the furlough period. From 1 July 2020, furloughed employees will be allowed to return to work on a part-time basis.
The employer will still be able to claim the furlough grant for the hours that the flexibly furloughed employees do not work, compared to the hours they would normally have worked in that period (‘non-working furloughed hours’). Employees must not work or provide any services for the employer during their non-working furloughed hours.
From 1 August 2020, employers will have to contribute towards the costs of furloughing employees.
Which employers can claim under the CJRS?
Employers can claim for employees that they have furloughed if they have:
- furloughed those employees for at least three consecutive weeks between 1 March and 30 June 2020;
- a UK PAYE payroll scheme on or before 19 March 2020;
- enrolled for PAYE online;
- submitted a report under the real time information (RTI) system for PAYE for those employees on or before 19 March 2020;
- a UK bank account.
Do employers have to allow employees to work part time?
No. The guidance states that employers can continue to fully furlough employees, provided that no work is carried out for the employer by those employees during the time that they are recorded as being on furlough.
Which employees can be placed on flexible furlough?
The general rule is that only employees who have previously been furloughed for a minimum of 3 weeks at some point before 1 July 2020 can be placed on flexible furlough. The employee does not have to have been on furlough on 30 June.
On 29 May 2020, the Government announced that the CJRS will close to new entrants from 30 June 2020. This means that employees must have been furloughed for the first time by no later than 10 June 2020.
However, there are some exceptions. Employees returning from a period of statutory family leave, such as maternity leave can be furloughed after 10 June even if they are being furloughed for the first time if the conditions set out in the guidance are met. A similar exception applies to employees who are military reservists returning to work after a period of mobilisation after 10 June, providing that the conditions set out in the guidance are met.
The guidance reminds employers that when deciding which employees to furlough, existing equality and discrimination laws apply in the usual way.
Does the employee have to be at risk of redundancy to be covered by the scheme?
There does not appear to have been any change to the position in the original CJRS on this point. The guidance states that employers can furlough employees if they cannot maintain their workforce because their operations have been affected by coronavirus.
Is there a maximum number of employees who can be placed on flexible furlough?
Yes. 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 ending by 30 June. This will be particularly relevant for employers who have previously rotated furloughed employees.
The guidance provides the example of an employer that has previously submitted three claims between 1 March and 30 June, in which the total number of employees furloughed in each respective claim was 30, 20 and 50 employees. The maximum number of employees that the employer could furlough in any single claim starting on or after 1 July would be 50.
However, employees who were on statutory family leave or military reservists on a period of mobilisation are counted in addition to this maximum (see below).
Are there any restrictions on the working arrangements for employees on flexible furlough?
No. The guidance states that employers can bring back employees “for any amount of time and any work pattern” while still being able to claim for the employee’s normal hours not worked. It appears therefore, that there will be no minimum or maximum limits on the work that an employee can carry out during furlough.
Employers must keep records of how many hours the employees work and their non-working furloughed hours.
Is there a minimum period of flexible furlough?
Under the original CJRS, there was a requirement that each separate furlough period must be for a minimum of three weeks.
There is no requirement under the flexible furlough scheme that employees must be furloughed for a minimum three-week period from 1 July 2020. The guidance states that flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once.
However, any period of furlough that commenced before 30 June must be for a minimum three-week period, even if this extends beyond 1 July. The guidance gives the example of a previously furloughed employee who starts a new furlough period on 22 June. This new furlough period would have to last for at least 3 consecutive weeks ending on or after 12 July. After that date, the employee can then be flexibly furloughed for any period.
Do the employees have to consent?
Yes, if the employer wants to change the furlough arrangement after 1 July. However, this will depend on the terms that were agreed in the original furlough agreement.
The requirement under the original CJRS was that employees could not work for the employer during furlough. If the employer wishes an employee to work part-time under a flexible furlough arrangement, there must be a new agreement (if the employee was previously furloughed but is currently working) or a variation to an existing agreement (if the employee is currently furloughed) with the employee. This will require consent from the employee.
The guidance states: “If you flexibly furlough employees, 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”
If the employee is fully furloughed and that arrangement will not change after 1 July – arguably no new or varied agreement will be required. However, employers should check carefully what provisions were in the original furlough agreement regarding when that furlough period would end. If the furlough period is being extended, a variation to that agreement may be necessary.
Does the agreement with the employee have to be in writing?
The guidance states that to be eligible for the grant, employees must have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed. The guidance also states that the employer should keep a copy of the furlough agreement for five years.
The guidance goes on to state that the employee does not have to provide a written response. However, our view is that employers should ensure that there is written agreement from the employee to the new flexible working arrangement, as this may be evidence that there was a valid variation to the employee’s terms and conditions of employment.
What happens if the employee does not agree?
Unless it has been agreed with the employee, the employer cannot compel employees to return to work on a part-time basis and remain furloughed for the remainder of their normal working time.
It is possible that where an employee refuses to return to work part-time, the employer may need to consider dismissal. However, careful consideration should be given to the reasons for the employee’s refusal and whether any alternative arrangements can be agreed with the employee. Depending on the circumstances, an employer that dismisses an employee in these circumstances faces a risk of unfair dismissal or discrimination claims. Employers should therefore seek legal advice before dismissing any employee in these circumstances.
Can an employee on flexible working undertake training?
Yes. Furloughed employees can carry out training during hours which are non-working furlough, as long as this does not involve providing services for or generating revenue for or on behalf of the employer or any linked or associated organisation. The guidance states that furloughed employees should be encouraged to undertake training.
Time spent carrying out training will not be regarded as working hours for the purposes of the grant, but the employee must be paid the National Minimum Wage in respect of the training. If the time spent training attracts a minimum wage entitlement in excess of the grant, employers will need to pay the additional wages.
Records of any agreed training undertaken during furloughed hours should be kept by the employer.
Can an employee on flexible furlough do volunteer work?
Yes. Furloughed employees can carry out volunteer work during non-working furloughed hours as long as it is for another employer or organisation. The volunteer work must not involve providing services for or generating revenue for the employer or any linked or associated organisation.
Can an employee on flexible furlough work for another employer?
Yes, if this is contractually allowed. Furloughed employees can work for another employer during non-working furloughed hours as long as this does not involve providing services for or generating revenue for the employer or any linked or associated organisation.
Can furloughed employees work as union or non-union representatives?
Yes. The guidance states that union or non-union representatives may undertake duties and activities for the purposes of individual or collective representation of employees during the hours which the employer records them as being on furlough. However, in doing this, they must not provide services to or generate revenue for, or on behalf of the employer or a linked or associated organisation.
How will an employee on flexible furlough be paid?
The employer will continue to pay the employee for working hours and for non-working furloughed hours. All pay will be subject to deduction of tax and NICs.
The employer will be able to continue to claim from the CJRS for the employee’s non-working furloughed hours, subject to the relevant caps.
Can the employee be paid less than the National Minimum Wage (NMW)?
Not for the hours that they are working or treated as working under NMW rules.
For non-working furloughed hours, employees can be paid the lower of 80% of their wages or £2,500 even if, based on their usual working hours, this would be below NMW.
Time spent training whilst furloughed must be paid at the NMW. Therefore, employers must ensure that the wages and furlough payment provide enough to cover all working time including training hours – see above.
What are the rules on holiday and holiday pay during furlough?
See our separate guidance on holiday and holiday pay during furlough.
How much can the employer recover under the grant?
Until the end of July 2020, employers can claim up to the lower of 80% of the usual monthly wage costs up to a maximum of £2,500 per employee, plus the associated employer national insurance contributions and minimum auto-enrolment employer pension contributions on the capped furlough pay in respect of non-working furloughed hours.
This will change from 1 August – see below.
The employer cannot claim for:
- additional NI or pension contributions that they make because they choose to top up the employee’s wages;
- the employee’s wages for any time they spend working or any NI or pension contributions they make on those wages; or
- any pension contributions the employer makes that are above the mandatory employer contribution.
How will the scheme change from 1 August 2020?
From 1 August 2020, employers will be required to contribute to the costs of the furlough scheme.
August to October: Employers will be required to pay the employer NICs and employer pension contributions on the furlough pay.
September: Employers will be required to pay 10% of employees’ furlough pay, capped at £312.50. The government will pay 70% of employees’ furlough pay, capped at £2,187.50.
October: Employers will be required to pay 20% of employees’ furlough pay, capped at £625.00. The government will pay 70% of employees’ furlough pay, capped at £1,875.00.
The new caps will be proportional to the hours not worked.
What does an employer need to do to claim the grant?
Employers will need to work out:
- the length of their claim period;
- what they can include when calculating wages;
- the employee’s usual hours, the actual hours they work and the non-working furloughed hours (unless the employee is fully furloughed).
What is included when calculating wages for non-working furloughed hours?
This is made up of “regular payments you are obliged to make” including:
- regular wages;
- non-discretionary payments for hours worked, including overtime;
- non-discretionary fees; non-discretionary commission payments; and
- piece rate payments.
The employer cannot include when calculating wages:
- payments made at the discretion of the employer or a client – where the employer or client was under no contractual obligation to pay, including any tips, discretionary bonuses and discretionary commission payments;
- non-cash payments;
- non-monetary benefits such as benefits in kind and benefits received under salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay.
Normally, an employee cannot switch freely out of most salary sacrifice schemes unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.
What about employees returning from family related statutory leave or sick pay?
For employees on fixed pay, claims should be calculated against the employee’s salary, before tax, not the pay that they received whilst on family related statutory leave or whilst off sick.
For those on variable pay, claims should be calculated using the highest of either 80% of the same months’ wages from the previous year (up to a maximum of £2,500 per month) or 80% of the average wages for the tax year 2019 to 2020 (up to a maximum of £2,500 a month).
Working out the employees working and non-working furloughed hours
There are two different calculations the employer can use to work out the employee’s usual hours, depending on whether they work fixed or variable hours. These are set out in the guidance. That guidance also sets out examples of how to calculate the number of working and non-working furloughed hours for each employee.
Working out 80% of wages
The employer will need to work out 80% of the employee’s usual wages to determine how much they have to pay employees for the non-working furloughed hours and what they can claim under the scheme. Details of how to calculate 80% is set out in the guidance. Employers should check carefully what should be included in the calculation of wages.
Are there any worked examples of how to calculate furlough pay?
Yes. Worked examples are in the guidance here.
Claiming the grant
Any claim made under the original CJRS (which ends on 30 June) must be made by 31 July 2020.
The first time that an employer can make a claim for furlough periods in July will be 1 July 2020. Claim periods will need to be a minimum of a week, and claim periods will no longer be able to overlap months.
Employers can only make one claim during a claim period for each PAYE scheme it operates. Each claim must include all furloughed employees on the relevant PAYE scheme. Employers cannot make changes to their claim once it has been submitted.
Employers can submit a claim before running payroll to ensure that funds are received in time to make payment to the employees. However, employers must know exactly how many hours employees will have worked during the claim period before they claim. Examples are set out in the guidance.
Employers must keep records relating to the claims for reimbursement under the CJRS for six years.
How quickly will employers receive the grant?
The government guidance states that HMRC will make the payment within six working days.
What happens if an employer makes an error in the claim?
The guidance states that if the employer makes an error in a claim that has resulted in an over-claimed amount, the employer must pay it back to HMRC. This can be reflected in the employer’s next claim and the amount paid in the next claim can be adjusted accordingly. A record of the adjustment must be kept for six years.
If the employer makes an error in a claim and does not plan to submit further claims, HMRC are working on a process to notify it and repay the amount claimed.
When will the scheme close?
The flexible furlough scheme will close on 31 October 2020.
Useful sources of information
30 June 2020
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©2020 SCRASE LAW LTD. THIS POST IS FOR GENERAL INFORMATION ONLY AND IS NOT ADVICE. YOU ARE RECOMMENDED TO SEEK COMPETENT PROFESSIONAL ADVICE BEFORE TAKING ANY ACTION ON THE BASIS OF THIS POST