Flexible Furlough Scheme
On Friday night at around 10.00pm, HMRC released details of the flexible furlough scheme, which starts on 1 July 2020. Under this scheme, employees no longer need to avoid doing any work in order for their employer to make a successful claim under the CJRS for furlough pay, but can work for some of the week and be furloughed for the rest, in proportions decided between employee and employer.
HMRC released the details by updating the existing employer guidance on the CJRS and by issuing three new pieces of guidance all of which are accessible via the gov.uk website (see links below). Employers who intend to rely on the furlough scheme come July will need to read all the guidance very carefully to ensure that they are able to make a successful claim.
In very general terms, under the flexible furlough scheme, employers will claim a pro rata’d amount of 80% of salary, based on the proportion of hours not worked out of normal working hours. To calculate the normal working hours for those with fixed hours/pay, you simply take the number of hours worked in the pay period before 19 March 2020. To calculate the normal working hours for those with variable pay, you take the higher of (a) the average number of hours worked in the tax year 2019 to 2020 or (b) the corresponding calendar period in the tax year 2019 to 2020. In order to assist employers, HMRC have included some worked examples of the calculations which again, can be found on the gov.uk website and are linked below.
Remember that from 1 August 2020, the level of grant will be reduced each month, and to be eligible for the grant, employers must pay furloughed employees 80% of their wages, up to a cap of £2,500 per month for the time they are being furloughed. Wage caps are proportional to the hours an employee is furloughed. For example, an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.
- There are no changes to grant levels in June.
- For June and July, the government will pay 80% of wages up to a cap of £2,500 for the hours the employee is on furlough, as well as employer National Insurance Contributions (ER NICS) and pension contributions for the hours the employee is on furlough. Employers will have to pay employees for the hours they work.
- For August, the government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
- For September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
- For October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
Employers will continue to able to choose to top up employee wages above the 80% total and £2,500 cap for the hours not worked at their own expense if they wish.
From 1st July, the most significant change we will see with the flexible furlough scheme is that the minimum three week period for furlough will be removed. There will no longer be a minimum period for which someone must be furloughed under the flexible furlough scheme, although any claim through the CJRS portal must be in respect of a minimum one week period. Employees who were furloughed prior to 1st July must still be furloughed for at least 3 weeks for a successful claim to be made.
Other headline points employers should be aware of include:
- A requirement for any flexible furlough arrangement to be agreed and recorded in writing
- Employees can be flexibly furloughed more than once
- From 1st July employer claims cannot exceed the maximum number of employee claims they made prior to 30th June
- Cross calendar month claims won’t be permitted after 1st July
- Employers furloughing over 100 staff will have to submit extra details to HMRC
- From 1st July, “full” furlough will still be permitted
- Claims under the CJRS for July cannot be made until 1st July
We would strongly recommend that you take a look at the gov.uk website for the latest updates and links to some of the key webpages are below, but of course, if you would like to discuss the in’s and out’s of the flexible furlough scheme at all, then you know where we are and please do feel free to contact us on 01274 864999 at any time.
Relevant webpage links
Updated employer guidance on CJRS and claiming for wages.
Guidance for checking which employees can be furloughed.
New guidance outlining steps an employer needs to take before calculating their claim.
New guidance to help employers work out how much they can claim under the CJRS.
Claiming for employees’ wages online.
Guidance for reporting payments in PAYE RTI.
Guidance for working out part-furloughed/flexibly furloughed salary.
Some helpful worked examples!