Legal

Furlough has turned flexible – but what’s really changed?

1 Jul 2020 By Paul Kelly

With the tapering of the job retention scheme officially coming into force today, Paul Kelly discusses what the new rules will mean for businesses and employees

Since its announcement on 20 March, the coronavirus job retention scheme (CJRS) has been used to furlough around 8.4 million employees in the UK, with 80 per cent of their wages paid by the government, up to a maximum threshold. 

On 29 May, the chancellor heralded the end of the CJRS and introduced the concept of ‘flexible furloughing’, which comes into force today (1 July). This will see a tapering of the scheme until its final closure at the end of October, alongside the introduction of employer contributions to the payment of furloughed employees.

This announcement came as a relief to many employers that were concerned a sudden end to the scheme would financially cripple businesses because of the abrupt increase in wage costs caused by staff returning from furlough. The tapering of the scheme should allow employers to gradually bring their furloughed staff back into the workforce and ramp up productivity before returning to business as usual.

However, the current version of the scheme closed to new entrants yesterday (30 June), and only employees who were furloughed before 30 June and had been included on a claim to HMRC can be furloughed after 1 July under the new version of the scheme. Also, after 1 July, the maximum number of employees that a business can claim for under the scheme is capped at the highest number of employees previously included on any single claim submitted before 30 June. 

Flexible furlough will see employees able to do some work for their employer during the week, but spend the remainder on furlough. It is still within the employer’s discretion to decide who is flexibly furloughed, and isn’t something that an employee can demand. If an employee is placed on flexible furlough, both parties will need to enter into a new written agreement that sets out the hours and days that the employee will work, along with any other working arrangements.

Employees must be paid in full for the hours they’ve worked by their employer, while a claim should be made via the scheme for the time spent not working, calculated by reference to their usual working hours.

A number of crucial dates for the furlough scheme are coming up following the introduction of flexible furlough, which businesses should be aware of. The minimum three-week furlough period no longer applies from 1 July, while employers will be required to contribute to the wages of furloughed staff in the form of employer national insurance and pension contributions in order to access the scheme from 1 August. If they cannot afford this contribution, then the employee must be taken off furlough.

Furthermore, from 1 September employers will only be able to recover 70 per cent of wages (up to a cap of £2,187.50) via the scheme but must top up the payment to 80 per cent. Then from 1 October employers will only be able to recover 60 per cent of wages (up to a cap of £1,875) but must again top up the payment to the employee to 80 per cent. The CJRS officially closes on 30 October 2020, so employers must begin planning for the impact of this and other key dates on their business, and how they are going to begin bringing employees back to work.

Paul Kelly is head of employment at Blacks Solicitors

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