The latest furlough updates – explained

Melanie Lane and Tracey Marsden outline the implications for employers of the government’s job retention scheme guidelines

Agreement with the employer

While it is still the case that employers must agree with their employees that they will be furloughed, the updated guidance confirms that any retrospective agreement to cover the period from 1 November 2020 must have been put in place on or before 13 November. For the first time the guidance states that it is up to the employer to decide whether to offer an employee a furlough agreement. 

Redundancies and rehiring

The guidance makes it clear that that any employees who were employed and on the payroll on 23 September but who were made redundant from their employer on or after that date can be ‘re-employed’ and claimed for – provided that the employer had made a RTI submission to HMRC between 20 March and 30 October 2020, notifying a payment of earnings for those employees.

Notice period policy changes

What has come as a surprise is that, while the guidance still states that “you can continue to claim for a furloughed employee who is serving a statutory notice period”, it also warns that the question of whether a claim can be made in respect of a period of contractual or statutory notice is under review. It goes on to say that the government “will change the approach for claim periods starting on or after 1 December 2020, with further guidance published in late November”. 

The same warning is also given in the employee-facing guidance, putting staff on notice that it is likely that their employer will not be able to claim the grant in respect of any part of their notice period during which they are furloughed from 1 December.

This signals a change of policy on this issue by the government, which could be financially problematic for employers – in particular those that have held off on serving notice of termination since the initial announcement of the extension to the furlough scheme was made, in the expectation that the grant would cover notice periods as it previously had.  

TUPE and furlough

As expected, the guidance confirms that the extended furlough scheme applies to new employers of employees who have transferred to them on or after 1 September 2020 pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006 or where the PAYE business succession rules apply to the change in ownership. An RTI submission must have been made by their old or new employer between 20 March and 30 October 2020.

Reference pay and usual hours

The guidance says when calculating an employee’s wages or determining their usual hours for the purposes of claiming under the furlough scheme:

  • for employees who were either (a) on their employer’s payroll on 19 March 2020; or (b) previously furloughed and validly claimed for in a claim period ending on or before 31 October 2020, the same calculations as under the original scheme should be used; but
  • for everyone else:
  • salaried employees’ wages must be calculated on the basis of what they received in their last period ending on or before 30 October 2020;
  • employees with fixed hours – ‘usual hours’ should similarly be determined on the basis of their contracted hours worked in the last pay period ending on or before 30 October 2020;
  • employees with variable pay – wages must be calculated on the basis of what they received between (i) the later of the date their employment commenced and 6 April 2020; and (ii) the day before their period of furlough leave under the extended furlough scheme begins; and
  • employees who work variable hours – ‘usual hours’ are the average hours worked between 6 April 2020 and the day before their period of furlough leave under the extended furlough scheme begins.

Important dates and deadlines

Retrospective furlough agreement Any agreement to retrospectively furlough an employee with effect from 1 November 2020 must have been made by 13 November 2020.

Claim period 1-31 October 2020 Claims must be submitted by 30 November 2020.

Claim period 1-30 November 2020 The claim window has now opened and closes on 14 December 2020.

Subsequent claim periods Claims for periods from 1 December onwards must be made by the 14th of the month following the end of the relevant claim period.

Amendments to increase claims made from 1 November 2020 Any amendment to increase the amount previously claimed must be submitted within 28 calendar days after the month the claim relates to (or the next working day if this falls on a weekend).

Melanie Lane and Tracey Marsden are employment partners at CMS