Changes under extended furlough scheme
Q: What changes have been made to the extended Coronavirus job retention scheme?
The key changes to the extended Coronavirus job retention (or flexible furlough) scheme are:
- From 1 July the employer and employee can operate new arrangements where employees are partly furloughed and partly return to work.
- In June and July, the Government will continue to pay furlough grants for the hours not worked by furloughed employees (ie 80% of wages, capped at £2,500).
- From July onwards employers will be required to pay normal salary for any hours worked by employees.
- From August employers will have to pay employers’ NI and relevant pension contributions on furlough pay or salary regardless of whether the employee is fully or partly furloughed.
- In September and October employers will be required to contribute at least 10% and 20% respectively towards employees’ furlough pay so that the cap on the part of the grant paid reduces before the scheme ends in October.
Although employer contributions will increase from August onwards employees’ income should not fall below the 80% figure subject to the cap. The Government will therefore continue to contribute towards any non-working time of furloughed staff until the end of October.
From July onwards claim periods must be limited to a calendar month to fit in with the changing level of grant; overlapping months will only be permitted before July. The period claimed needs to be for at least three weeks before July and at least one week afterwards, although monthly or fortnightly pay periods can be used.
The extended furlough agreements must be confirmed in writing and employers must report the hours employees have worked compared to the hours the employee would usually work. The grant claim will be based on the percentage of hours not worked and between July and October the grant cap will be proportional to the hours not worked.
A similar longer period of government support applies to the Self-Employment Income Support Scheme. For further details see our FAQs on the support available for the self-employed. Further government guidance will be published on 12 June although the current Government fact sheet confirms the essential points. More information is also available in our furlough guide.
Q: What are the main dates for the extended furlough scheme changes?
The main dates for the changes to the extended Coronavirus job retention or flexible furlough scheme are:
- 10 June: Any employees being furloughed for the first time must be placed on furlough by this date for a minimum period of three weeks.
- 30 June: The furlough scheme closes to new applicants.
- 1 July: The new flexible furlough scheme starts for employers who have furloughed these employees previously. Furloughed employees can be partly furloughed and partly working from home or in the workplace and the grant can be claimed for the hours not worked.
- 13 July: Applications for grant under the first self-employed income support scheme close.
- 31 July: Final date for employers to make claims for the period to 30 June 2020.
- 1 August: From this date the level of the grant employers can claim from the Government will progressively reduce. Although 80% of furloughed employees’ wages can still be claimed up to a cap of £2,500 for hours not worked, employers must pay employer NICs and pension contributions even if the employee is fully furloughed. The ability to reclaim these items ends. Employers must pay employees for hours worked, plus NI and pension payments in the usual way.
- 1 September: The amount of Government grant that can be claimed reduces to 70% of wages, subject to a cap of £2,187.50, for the hours that the employee does not work. The employer must pay 10% to make up the shortfall and ensure the employee still receives the 80% up to a cap of £2,500 plus employers’ NI and pension contributions.
- 1 October: The amount of Government grant that can be claimed reduces to 60% of wages, subject to a cap of £1,875 for the hours the employee does not work. The employer must now pay 20% to make up the shortfall and ensure the employee still receives the 80% up to a cap of £2,500 plus employers’ NI and pension contributions.
Q: Is the most critical date for the furlough scheme changes the 10 or 30 June?
The most critical date for the furlough scheme changes is the 10 June. The scheme will close to new entrants on that date – so employers intending to furlough employees, who have not previously been furloughed, must do so by 10 June. Employers will not be able to access grant payments under the Coronavirus Job Retention Scheme if they try to put employees on furlough for the first time after that date.
The existing furlough scheme runs until 30 June with the Government paying 80% of employees' salaries, up to £2,500 per month, and employees can't work for that employer while on furlough until the end of June. From 30 June 2020 the scheme changes to a new flexible furlough scheme. With effect from 1 July 2020 furloughed employees can work for the employer part-time from the workplace or from home whilst still being entitled to a proportion of furlough grant payments in respect of the hours not worked.
Q: Under the extended furlough scheme does a staff member actually have to be on furlough leave as at 30th June to qualify, or does it count if they have previously been furloughed but are working on a staff rotation?
The extended or flexible furlough scheme can include all employees who have previously been furloughed with that employer, even if they are working on 30th June (for example on a staff rotation).
The official government fact sheet on the furlough scheme (also called the Coronavirus job retention scheme) says that from 30 June onwards, employers will only be able to furlough employees who have previously been furloughed for a full 3-week period prior to 30 June. After this date the scheme will close to new entrants.
In other words, from 1 July the scheme is only available to employers that have previously used the scheme for employees they have previously furloughed. There must have been at least one 3-week furlough period completed at some stage before the end of June.
Subject to further guidance, the staff member does not have to actually be on furlough as at 30 June, for example some employers have been bringing staff back for a few days at the end of the month to deal with administrative tasks and then furloughing them again. These employees could be applied for under the extended scheme.
The final date by which an employer can furlough an employee for the first time is the 10 June, in order for the requisite 3-week furlough period to be completed by 30 June.
The employers’ time limit to make any claims in respect of the period to 30 June, is 31 July. Further government guidance on the extended furlough scheme is expected on 12 June which is after the 10 June cut off point for furloughing employees who have not previously been furloughed.
Q: Does the newly extended furlough scheme mean that employees who started a new job after 19 March can now be furloughed?
The newly extended furlough scheme does not mean that employees who started a new job after 19 March can now be furloughed under the scheme. The main eligibility for access to payments for staff furloughed under the Coronavirus job retention scheme remains that there must have been an RTI submission notifying payment in respect of that employee to HMRC on or before 19 March 2020. For further details please see the FAQ on the change of payroll date in the Coronavirus Job Retention scheme from 28 February to 19 March, under the 'Pay during furlough' section.
Q: If an employee has already been taken off furlough before 10 June, can that employee be re-furloughed again after 10 June under the extended furlough scheme?
Yes if an employee has already been taken off furlough before 10 June but has undertaken a full three week furlough period before then, that employee can be re-furloughed again after 10 June under the extended scheme.
The official Government fact sheet on the Coronavirus job retention scheme says that from 30 June onwards, employers will only be able to furlough employees who have previously been furloughed for a full 3-week period prior to 30 June. After this date the scheme will close to new entrants. For further details see the above FAQ on whether a staff member actually has to be on furlough leave as at 30 June to qualify.
Q: What amount can be claimed for an employee on flexible furlough?
Employers claim for the hours employees are not working is calculated by reference to their usual hours worked in a claim period. The official Government fact sheet on the furlough scheme says that the cap will be proportional to the hours not worked. Employers must report hours worked and the usual hours an employee would be expected to work in a claim period.
For example, an employer and employee may agree that an employee, previously on furlough, returns to work half time, meaning they now work for 20 hours compared to a 40-hour working week before the pandemic. For the hours the employee is not working they will be covered by furlough pay, and for the hours worked will be paid salary as normal. If the employee normally earns £3,000 a month, they would have got full furlough pay of £2,400 a month. On returning to work half time the employee would earn £1,500 a month from the employer (as the proportion of normal monthly salary) plus £1200 for the 20 weekly hours of furlough (half the monthly furlough pay). This means the employee would get a total of £2,700 a month for working half time compared to £300 less if they were on full furlough.
Q: If an employee was furloughed but has already gone back to work part time, can that employee be furloughed again in the flexible furlough scheme from July onwards?
Any employees who were on furlough for a full three-week period before 30 June, can be furloughed again under the extension of the scheme. This means any employees who were furloughed and have returned to work part time can be put into the extended furlough scheme from July onwards. However, if any employees have already agreed to reduce their hours to a part-time role with a part time salary there may be difficulties with the amount of grant that can be claimed due to questions about which salary can form part of the claim. The guidance says that the amount of the grant claimed should be calculated by reference to the employee’s usual hours worked.
If an employee can return to a full-time role purely to be furloughed from part of it, that does not seem in the spirit of the scheme, and in any event would not absolve the employer of the obligation to pay the salary for any hours worked or the percentage contributions to furlough pay due under the scheme in August to October.
Further guidance is awaited and hopefully this will fully address if employers can agree to increase part time employees to a full-time role before furloughing them. It seems more likely that the full guidance which emerges on 12 June is likely to state that employees can only be furloughed and claim a proportionate amount based on the contractual arrangements in force immediately prior to their period of furlough, but we will have to wait for the guidance.
Under the scheme, and under normal employment law, employers need to pay whatever is due under the employee’s contract for any hours worked and will be responsible for all tax and NI contributions due on those amounts.
Q: If employers have furloughed staff but do not want to pay the additional costs from August onwards, can they ask employees to agree to forego the extra amount in return for receiving the furlough pay?
If employers have furloughed staff, they will have to pay the additional costs from August onwards. This will be part of the legislation and presumably an enforcement mechanism will be attached. Employees are effectively guaranteed 80% during furlough subject to the financial cap. There will be no change to the level of financial assistance provided by the Government during June and July. After then employers must start to contribute and the Government will pay the following percentages:
- August: 80% of wages up to a cap of £2,500 but employers will pay employer NI and pension contributions for the hours the employee does not work.
- September: 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay employer NI and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
- October: 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will also pay employer NI and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
The official Government fact sheet accompanying the extensions to the furlough scheme does not overtly address what happens if employers do not pay the supplement or ask employees to agree to forgo the extra amounts in return for receiving the furlough grant. As employees should receive the overall 80% figure they will not do so if the employer does not supplement it. Government guidance does emphasise that on average employers are being asked to contribute 5% of the overall cost in August, 14% in September and 23% in October which is far less than the pre-furlough salaries.
Employers usually have a high degree of freedom to agree to vary employment contracts with employees, but the fact that employees must receive the 80% in full without any deductions is a statutory requirement. If employers decide they are not able to pay these amounts they may start a redundancy process if there is insufficient work and the employer expects that work is unlikely to return to previous levels for a considerable time. The overall cost of making redundancies and redundancy payments will be higher than the above percentages of furlough salaries for three months. Therefore, if employers make redundancy decisions this is more likely to be based on predictions about future. For employers contemplating redundancies and potential alternatives see the redundancy during COVID-19 guide for more information.