What do we already know?
As explained in our April Newsletter All Things Furlough – FAQS and what we know so far the Coronavirus Job Retention Scheme (‘CJRS’) is a temporary scheme funded by the Government to create an alternative to implementing redundancies, lay-offs, unpaid leave or other measures employers might otherwise need to instigate during the current crisis.
CJRS changes from 1 July 2020
From 1 July, the Coronavirus Job Retention Scheme (CJRS) changed in three main respects:
- it is more flexible and allows furloughed employees to return to work part-time, but still claim under the CJRS for any hours not worked (‘flexible furlough’);
- claims for wages to the HMRC are changing; and
- employer costs start to increase.
On 12 June, the Government published revised guidance (available here) covering these changes.
What is flexible furlough?
From 1 July businesses will be given the flexibility to bring furloughed employees back to work part-time and still claim under the CJRS. This is known as ‘flexible furlough’. Employers can continue to fully furlough employees if they wish.
The key features of the flexible furlough scheme are as follows:
- from 1 July 2020, employees can return to work on a part-time basis, and yet remain on the furlough scheme for hours not worked. I.e. employers and employees can agree a mix of working time and furlough time within the furlough period;
- the Government guidance states that the employer will need to agree any new flexible furlough arrangement with the employee and keep a written agreement confirming the new arrangement;
- for the hours not worked under the flexible furlough arrangement (the ‘furloughed hours’), the existing ‘no work’ rule continues to apply and the employee must not do any work that makes money for or provides services for the employer;
- there is no minimum furlough period and flexible furlough arrangements can last any amount of time; and
- employers will need to work out an employee’s usual hours, the actual hours worked and their furloughed hours. The employee’s usual hours must be calculated for each pay period (or part of a pay period) that falls within the claim period (for guidance on these calculations see here and here). Records must be kept for five years of how many hours the employees work and the number of hours they are furloughed.
Also, it is worth noting that the Government has updated its guidance on the CJRS to clarify that:
- employees should not be placed on furlough for a period simply because they will be on holiday and the employer wants to use the CJRS to fund (or part-fund) their holiday pay. However, if an employee is already flexibly furloughed and then takes holiday, the holiday hours should be counted as ‘furloughed hours’ for the purpose of the claim under the revised CJRS;
- a CJRS grant can be used to pay an employee during their statutory notice period. However, the question of whether a CJRS grant may be used to pay an employee throughout their contractual notice period, if that is longer than the statutory minimum required, has still not been answered. See updated guidance here and here.
- the HMRC online calculator (linked to here) has been improved to allow it be used to work out what can be claimed for in a claim period ending on or before 31 August (previously it only encompassed periods ending on or before 31 July), plus expanded flexible furloughing examples, with one for an employee who is flexibly furloughed in July, and a second for an employee who is flexibly furloughed in August.
What are the changes in making claims for wages to HMRC?
These main changes include:
- only employers which have previously submitted claims under the CJRS can submit further claims, and only in respect of employees they have previously furloughed (except for returners from family related leave). I.e. any employees claimed for should have already completed at least one three-week furlough cycle by 1 July;
- the number of employees claimed for must not exceed the maximum number of employees claimed for before 30 June;
- employers cannot make claims that cross calendar months, so:
- the first time employers can make claims for days in July will be 1 July;
- a separate claim will need to be made for the period up to 30 June; and
- any claim periods starting on or after 1 July must start and end within the same calendar month.
Given the scope for confusion over timing of claim periods, the Guidance provides a number of worked examples, available here;
- 31 July is the last day that employers can submit claims for periods ending on or before 30 June;
- when submitting a claim to HMRC to recover furlough wage costs, the claim must cover a period of at least seven calendar days, unless a claim is being made for the first or last few days in a month and the employer is already claiming for the period immediately before it;
- only one claim may be made for any claim period – all employees will therefore need to be included even if they are paid at different times. The guidance indicates that the claim period should be matched to the dates the employer processes payroll;
- employers can use the online service to delete a claim within 72 hours of submitting it (see updated guidance here); and
- incorrect claims as a result of a genuine mistake can be rectified. In this case, employers should inform HMRC of any over/under claimed amount (preferably as part of their next claim). Any overpaid sums will need to be repaid – normally through an adjustment to a subsequent claim (see updated CJRS guidance Find out how to pay all or some of your grant back if you’ve overclaimed through the Coronavirus Job Retention Scheme).
What are the changes to CJRS Government funding?
Until 31 July 2020, the Government will continue to cover furlough costs on the current basis (80% up to £2,500, plus employer NICs and pension contributions).
However, from 1 August 2020, employers will be expected to meet some of the furlough costs as set out below:
|Date||% recoverable wages||Additional employer liabilities|
|1 July||80% unworked days (up to £2,500)|
|1 August||80% unworked days (up to £2,500)||Employer National Insurance (NI) and pension contributions|
|1 September||70% unworked days (up to £2,187.50)||Employer NI and pension contributions & 10% wage contribution (to make up the 80% total up to a cap of £2,500 i.e. up to £312.50)|
|1 October||60% unworked days (up to £1,875)||Employer NI and pension contributions & 20% wage contribution (to make up the 80% total up to a cap of £2,500 i.e. up to £625)|
No further Government subsidy will be payable after the end of October.
There are no changes to the pay taken into account for the revised CJRS and is determined by reference to an employee’s regular pay. However, working out an employee’s level of pay as between usual hours and furloughed hours is potentially more complicated for those on flexible furlough.
Employers will be required to pay employees for any hours that are actually worked under flexible furlough arrangements in accordance with contractual arrangements. The starting point therefore is that employees are entitled to their full pay for any time when they are working, even if they had been receiving only 80% whilst on furlough to date.
There is no reason in principle why employers could not seek to agree varied pay arrangements with their employees, although National Minimum Wage requirements will apply in respect of time not spent on furlough and it is unlikely to be feasible to agree arrangements that are not as least as generous as those that apply under the CJRS.
What should employers do next?
The changes to the scheme are undeniably complex – in particular the calculations for flexible furlough. Therefore, the first decision for employers to make is whether the benefits of flexing staff hours in this manner will make up for the administrative burden of doing so! One possible alternative, now that there is no longer a minimum furlough period, is for employers to put in place a more frequent rotation of staff, for example, one week on furlough and one week off, which means employees are on “standard” furlough arrangements for those weeks not working. This would avoid the need to use the official flexible furlough scheme and the calculations that go with it.
Another pressing issue for employers is the increasing costs of the CJRS from 1 August 2020 and whether they will wish to continue using the scheme. The increased cost of furlough, combined with the increasing complexity of the calculations and process for claims, may mean employers need to pursue alternative options, such as changes to terms and conditions, or redundancy, sooner than later.