On Friday, 12th June 2020, the Government published further guidance on the changes to the furlough scheme, with more detail related to flexible furlough. This follows our earlier update available to view here.
From 1st July 2020, employers will be able furlough employees flexibly. This means that employees can be brought back to work on a reduced basis, for any length of time, and remain furloughed for the remainder of their usual working hours. Sounds simple, but sadly not. We have set out, below, the very key points employers need to consider.
1. Eligibility
In order to be eligible for flexible furlough, an employee must have previously been on a period of furlough for at least 3 consecutive weeks before 30th June 2020. This means that, if an employee has not previously been on furlough prior to 10th June 2020, you will not be able to now furlough that employee flexibly.
The only exception to this may be if an employee is currently on statutory maternity leave, paternity leave adoption leave, shared parental leave or parental bereavement leave and returns to work after 10th June. The Government have suggested that such employees could be furloughed, provided their employer has previously furloughed employees, but is yet to provide definitive guidance on this.
2. Written Record
Flexible furlough is once again subject to existing employment law principles, including equality and discrimination laws. This means that you must reach an agreement or have a written record with an employee as to the terms of placing them on flexible furlough. This agreement should be documented in writing and kept for 5 years.
3. Making a claim
An employer, using flexible furlough, will have to calculate the amount they are claiming from HM Revenue and Customs accurately. To make a claim under the scheme for a flexibly furloughed employee from 1st July, an employer must first calculate the employee’s usual working hours. How you arrive at this will depend on whether the employee has fixed contractual hours, or irregular hours.
Once you have calculated the usual working hours, they then need to work out the number of hours an employee is spending on furlough. To do this, an employer should subtract the hours the employee actually worked in the period claimed from the employee’s usual hours in that period. Simple, but not if the hours are irregular or there is no clear record or agreement with the employee about what is being worked.
4. Paying Employees
For any hours actually worked, employers must pay the employee their full salary, and this will not be recoverable under the scheme. However, employers will continue to be able to claim for the hours an employee spends on furlough, subject to the caps of the scheme. For any hours an employee spends on furlough, the employer must continue to pay at least 80% of their full wage. It remains open to employers as to whether they wish to top this amount up to 100% of the full salary.
5. What can we claim from HMRC?
Currently, an employer can claim back 80% of an employee’s wage up to a cap of £2,500. From 1st July 2020, the cap becomes proportionate to the hours the employee actually spends on furlough. For example, if an employee spends 40% of their hours on furlough, the maximum amount that can be claimed under the scheme for that individual will be 40% of £2,500.
The amounts employers can recover from HMRC will be further reduced from August.
6. When should we claim?
The Government has also confirmed that employers cannot make any claim for July onwards until 1st July 2020, and any claim you make from this date must not span more than one calendar month. Furthermore, the last possible date an employer can make a claim for any period of furlough on or before 30th June will be 31st July. Employers are therefore encouraged to observe this and work to get their claims in around these dates.
7. What should employers be doing now?
If an employer wants to use flexible furlough from 1st July 2020, it is recommended that they put agreements in place with employees, as soon as possible. Employers should also consider calculating your employee’s usual hours for your claims under the scheme. We are assisting a number of clients with these arrangements and getting them ready for the start of July 2020.
If you need any assistance with putting suitable furlough agreements in place with employees, or require further advice on the Coronavirus Job Retention Scheme feel free to contact Herrington Carmichael’s Employment Group on 0118 977 4045 or employment@herrington-carmichael.com.
This reflects the law at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought as appropriate in relation to a particular matter.
