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COVID-19 – Business Support – Flexible Furlough and the Road Ahead for the Coronavirus Job Retention Scheme

Written by Jon Cooper

The last date to furlough an employee under the Coronavirus Job Retention Scheme has now passed but, from 1st July, employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked.

This option only applies to employees who have previously been furloughed for at least three consecutive weeks taking place any time between 1st March and 30th June 2020, with the exception of those employees returning from statutory parental leave.

Another consideration is that the number of employees that can be included in any single claim period starting from 1st July is capped at the maximum number of employees claimed for in any claim ending by 30th June.

For example, if an employer has submitted three claims for thirty, forty and thirty employees then the maximum number of employees that could be furloughed in any single claim starting on or after 1st July would be forty.

To flexibly furlough employees, the employer will need to agree this with each employee and keep a written, signed agreement that confirms the new furlough arrangement.  It is essential that the agreement is consistent with employment, equality and discrimination laws and it must be kept on file for five years.

Flexible furlough agreements can last for any amount of time and an employee can enter into a flexible furlough agreement more than once.

There are a couple of traps to avoid.  Prior to 1st July, a furlough period must be for a minimum of three consecutive weeks regardless of whether this period ends before or after 1st July.

For example, a previously furloughed employee can start a new furlough period on 22nd June which would have to continue for at least three weeks. As a result, the first date the employee could be flexibly furloughed would be 13th July.  

After 1st July, employers cannot make claims that cross calendar months, so in this scenario, the employer would need to make a separate claim for the period up to 30 June.

For worked hours, the employee must be paid at their contractually agreed rate of pay.

For employees paid at the National Living Wage or National Minimum Wage level, these rates went up on 1st April.  Although this does not impact the Job Retention Scheme which is based on prior earnings, these will apply to the pay for hours worked under flexible furlough.  The new hourly rates are:

National Living Wage        £8.72

21-24 Year-Old Rate          £8.20

18-20 Year-Old Rate          £6.45

16-17 Year-Old Rate          £4.55

Apprentice Rate                 £4.15

Whilst there is no maximum length for claim periods, from July, claims cannot cross months.  As a result, for every furloughed employee, there is an effective end period on 30th June which is a particular consideration for weekly paid staff as this is a Tuesday.

Going forward for the remainder of the lifecycle of the scheme, for weekly paid staff, there will be a misalignment between the pay period and the claim period accordingly.

The final date for a claim for periods ending on or before 30th June is 31st July 2020.

From July, an employer can only make one claim for any period which has to be a minimum of seven days and claim periods must not overlap.  As a result, all furloughed and flexibly furloughed employees need to be included in the claim even if they are paid at different times. 

The claim can continue to be made before, during or after payroll processing and a claim can be made up to fourteen days before your claim period end date.

However, for flexibly furloughed employees, the claim should only be made once there is certainty on the number of hours worked during the claim period.

For a flexibly furloughed employee, each claim period will need to show the usual hours worked, the actual hours worked and furloughed hours.

There are two different calculations for an employee’s usual hours, depending on whether they work fixed or variable hours.

Variable hours apply if either:

The employee’s working pattern does not have to match their pay period.  For instance, an employee could be contracted to work forty hours in a five-day week but be paid monthly.

In this example, the usual hours in July would be 184 as a working day is eight hours and there are twenty-three working days in July. 

For employees whose pay varies by the amount of time worked, the usual hours will be calculated based on the higher of either:

The usual hours will need to be calculated for each pay period, or part of a pay period, that falls within the claim period.

The furloughed hours for each employee are the usual hours less the actual hours worked, even if the actual hours differ to what was originally agreed.

Remember a copy of all records must be kept for six years, including:

For July, the scheme will continue to cover 80% of the employee’s pay up to a cap of £2,500 plus the Employer’s National Insurance and pension contributions for fully furloughed staff, with these amounts pro-rated for flexibly furloughed staff.

For August, the scheme will only cover 80% of the employee’s pay up to a cap of £2,500 for fully furloughed staff, with the amount pro-rated for flexibly furloughed staff.

For September, the scheme will cover 70% of wages up to a cap of £2,187.50 and, for October, the scheme will cover 60% of wages up to a cap of £1,875.  However, for these months, the employee must continue to receive 80% of their pay up to a cap of £2,500.  Again, these amounts would be pro-rated for flexibly furloughed staff.

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