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HR Brief: How will the Furlough Scheme change from 1st July 2020?

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Further to the recently announced changes to the furlough scheme (see our blog on this), detailed guidance has now been published by the government. In this briefing, we look at some key questions relating to the changes.

Which employees are eligible?

The general eligibility requirements as were already in place have not been changed.

However, the scheme will close to new entrants from 30th June 2020. After this date, employers can only claim in respect of employees who have previously been furloughed for at least three consecutive weeks between 1st March and 30th June 2020. In practice this means that claims under the scheme can still be made for any employee who was furloughed for 3 weeks on or before 10th June 2020.

Accordingly, claims can be made for employees who remain furloughed or for an employee who is currently working but has been properly furloughed previously if the need arose to re-furlough them.

The only exception to this rule is employees who are returning from family related leave after 10th June 2020. Such employees can still be furloughed after the scheme has closed to new entrants. This applies to employees returning from maternity leave, paternity leave, shared parental leave, adoption leave, parental bereavement leave or parental leave. However, if the leave ended on or before 9th June, the individual employee must be able to meet the general eligibility requirements under the scheme for a lawful claim to be made.

It is also important to note there is now a cap on the number of employees who can be furloughed and sums claimed for at any one time. The cap is based on the greatest number of employees who were furloughed in any previous month. The example given in the guidance is an employer who claimed for 20 furloughed employees in March, 30 in April and 50 in May. The cap going forward will be 50, being the greatest number of claims previously made in one month.

What changes are being made to claims for furloughed employees?

  • From 1st July 2020, the minimum three week period for furlough is being removed and there is no minimum period an employee can be furloughed for. However, there will be a minimum claim period of one week (7 calendar days), so an employer can only claim for a minimum of a week at a time. If you have previously been doing this monthly, you can continue doing so. This is likely to be more straightforward for employees who are paid monthly.
  • On top of this, claims can no longer be made in respect of multiple months and can only cover days in a particular month. This means that if a period of furlough crosses multiple months, the employer must make two claims to recover the full payment. For example, if an employee is on furlough for a period covering the end of June and the beginning of July, the first part will need to be claimed in June and another claim made for the latter part in July.
  • From 1st July 2020, the Flexible Furlough Scheme is being introduced. This means that employees can return to work from furlough part time, on any hours or shift pattern which may be agreed. They must be paid their full wages for any hours which they work, which must be paid by the employer in full, including employer’s national insurance and pension contributions. The shortfall in wages in respect of days or hours which the employee would usually have worked were they not furloughed can be claimed through the furlough scheme.
  • Employees can remain ‘fully furloughed’ if they are not required to return to work.
  • From 1st August to 31st August 2020, employers can continue to claim 80% of employee wages up to a maximum of £2,500 per month for employees who have been furloughed. However, it will no longer be possible to claim the cost of employers’ national insurance contributions (NICs) and pension contributions in respect of these sums and employers will have to meet this cost from their own funds.
  • From 1st September to 30th September 2020, employers will remain responsible for employer NICs and pension contributions and will also be expected to pay 10% of employee wages. The amount which can be claimed under the furlough scheme will reduce to 70% of wages up to a maximum of £2,187.50 per month.
  • From 1st October to 31st October 2020, employers will remain responsible for employer NICs and pension contributions and will be expected to pay 20% of employee wages. The amount which can be claimed under the furlough scheme will reduce to 60% of wages up to a maximum of £1,875 per month.
  • The scheme will cease as of 31st October 2020 (unless it is extended further, which is not currently envisaged).

How do we ‘flexibly furlough’ an employee?

  • From 1st July, the furlough scheme will introduce a new concept of “flexible furlough”. This will permit an employer to ask an employee to return to work for part of their normal working week, while remaining furloughed for the remainder of the normal weekly working hours. Doing this will not end a period of furlough. There is no minimum period for which an employee needs to be furloughed when taking advantage of the scheme, whether in regards to hours worked within a week or in regards to the number of weeks a flexible furlough arrangement is in effect.
  • As previously, the furlough scheme is subject to employment law generally. Therefore existing rules apply in relation to contractual changes, any decisions regarding who should be furloughed or who should return will be subject to equality laws and must not be discriminatory.
  • Importantly, it is essential for an employer to have the employee to agree to any flexible working arrangement for a valid claim to be made under the scheme, unless implementing such a request is already permitted by the contract of employment (this will usually require an express lay off clause if the employer is not topping up pay to 100%). While the original guidance on the furlough scheme did not require employee agreement to be furloughed on a full time basis (this simply required the employer to instruct the employee to do not work) the requirements for flexible furlough are clear agreement is required. This can be by way of collective agreement through a trade union where appropriate.
  • The employee may be required to work from home as part of any flexible furlough agreement– this remains the default position where possible under the advice of the Scottish Government.
  • You should consider what was said in the initial confirmation that the employee was placed on furlough, as flexible furlough will be a further contractual change which may require variation of the initial terms. For example, if you initially advised that an employee would be furloughed and should do no work until ‘further notice’ or similar, you should refer back to that letter and advise they are now being given notice to vary the furlough arrangements, and set out the changes. Alternatively, if the initial agreement to furlough employees said that they would be furloughed until the scheme was brought to an end, you are likely going to get a new agreement from the employee to take benefit of the flexible furlough scheme.
  • Once agreed, you should confirm to the employee in writing that they will return to work, the hours they will work, and that they will remain furloughed for the remainder of their contractual hours, as well as the date from which these arrangements will take effect.
  • Collective consultation rules still apply in respect of redundancies and changes to terms and conditions of employment where 20+ employees are at risk of redundancy at any one “establishment”. As such, if a situation arises where an employer may need to consider redundancies of 20 or more staff if sufficient numbers of employees do not agree to a proposed flexible furlough arrangements, extra care should be taken.
  • You must keep records for 6 years detailing:
  • the amounts claimed
  • the claim period
  • the claim reference and
  • the employee’s
    • normal hours of work had they not been furloughed
    • the actual hours worked in the reference period and,
    • by implication, the number of furloughed hours a claim has been made for.

How do we work out hours/pay for a flexibly furloughed employee?

  • In short, an employee who works under a flexible furlough arrangement needs to be paid normally for the hours they work, and a claim for 80 % (in July and August; falling to 70% in September; and 60% in October) of wage for furloughed hours (subject to the cap) can be made under the furlough scheme.
  • Essentially, you have to first work out what an employee’s usual hours are (i.e. what they worked prior to March 2020). This will be more straightforward for employees who work a fixed number of hours each week. For an employee with variable hours, this will be the same as for working out their hours for furlough purposes generally: the hours worked in the same pay period in the tax year 2019 – 2020, or the average hours worked in tax year 2019 – 2020, whichever is the higher. If an employee was not employed at the same time last year, then you should use the average hours from the start of their employment.
  • The difference between the employees usual hours and the actual hours work will be their ‘furloughed hours’, in respect of which you can claim 80% of their wages (subject to the cap).

Example: An employee usually works 40 hours per week and earns £3,000 per month. They return working 20 hours, for which they are paid by their employer, and remain furloughed for the other 20 hours. Their employer can claim 80% of their usual wages for those 20 hours. 80% of their usual wages is 80% x £3,000 = £2,400 per month. The employee is working 50% of their usual hours, so the maximum claim is 50% x £2,400 - £1,200 per month. Employer NICs and pension contributions need to be calculated on top of this for July 2020.

The following links give further details on carrying out the calculations:

Do we have to top up the furloughed pay to 100%?

No, as previously any decision to pay an employee more than 80% for hours they are furloughed is at the discretion of the employer. Employees should not do any work during the hours they are furloughed.

Can an employee on flexible furlough continue in a second job?

The short answer to this appears to be yes.

Under the rules of the furlough scheme, employees were permitted to take up secondary employment, if contractually allowed, to supplement their income. It is possible that an employee who has done so will want to continue with their secondary employment after returning part time. The guidance for furloughed employees states that ‘you will need to be able to work for the employer that has placed you on furlough if they decide to stop furloughing you or start flexibly furloughing you’. This suggests the employee must be prepared to return to work, but if they could return under flexible furlough and still retain their other employment for the hours which they remain furloughed, there is nothing in the guidance which prohibits this, presuming their contract permits it.

One point to be aware of if an employee has taken up secondary employment and remains working in both is that the maximum weekly working time under the Working Time Regulations will apply unless they have opted out. Therefore, you will have to remind the employee of this and take steps to ensure they are not working more than an average of 48 hours per week.

As the guidance suggests the employee must be prepared to return to work when their employer take the decision to take them off furlough, this would suggest the employee cannot refuse to return on the basis that they have the secondary employment. The guidance does not give any further detail on this.

Can an employee on flexible furlough take holidays?

Yes. The employee can use their holidays to take time off from work, and per previous guidance holiday can be taken while on furlough. It will be a decision for the employer and employee when holidays are taken. For example, if an employee returns working 3 days per week and would usually have worked 5, will taking a week off use 3 days of the leave entitlement or 5 days? It should be remembered that for any days leave taken on furlough, the employer must pay the employee 100% of their wages, so pay must be topped up for any days the employees is deemed to have taken as holiday which are furlough days.

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