COVID-19: Furlough is changing

The following changes have been announced to the Coronavirus Job Retention Scheme and the government guidance has been updated accordingly:

  • Closure to new entrants from 30 June. Only those employees who have been on furlough for a minimum period of 3 weeks before this date may be furloughed. This means that 10 June 2020 is the latest date to put on furlough a new employee who has not been furloughed before.

    The HMRC has clarified on Twitter that the 3-week qualifying previous furlough period to be eligible for the Scheme past 30 June does not have to be ending on this date but could be at any time prior to this date. This would mean that an employee who was furloughed, for example, for 3 weeks starting 1 March only can still be put on furlough under the modified Scheme from July.

    The number of employees an employer can claim for in any claim period from July onwards cannot exceed the maximum number the employer has claimed for under the current Scheme.

  • Flexible working. From 1 July employers can have the furloughed staff work part-time and claim wages for the balance of the hours not worked through the Scheme. Say, a salesman is employed full-time normally working 40 hours per week. From 1 July, if the rest of the furlough conditions are met, he can work two days a week 16 hours in total, which the employer will pay together with due contributions, and the wages for the balance of 24 hours can be claimed through the furlough.

    The flexible furlough arrangement will have to be agreed with the employee and can be for any number of hours and any work pattern. The minimum period of flexible furlough will be one week. 
  • Tapered support. From 1 July the amount of furlough grant will be gradually reduced:

    July: the furlough grant remains at the current level;

    August: Payments for employer NI and pension contributions will stop from this point onwards. Wages will remain paid at 80% up to £2,500 cap;

    September: Wages will be paid at 70% up to £2,187.50. Employer will pay 10% of wages to make up 80% total up to £2,500 cap, and the NI and pension contributions;

    October: Wages will be paid at 60% up to £1,875. Employer will pay 20% of wages to make up 80% total up to £2,500 cap, and the NI and pension contributions

    Because of the changes, claims for overlapping months will not be allowed. Claims under the current scheme must be made no later than 31 July.

On 20 May 2020, the Treasury issued its second Direction governing the Scheme. This Direction narrows the gap between the first Direction and the published guidance:
  • No requirement for a written agreement between the employer and the employee that the employee will not be doing any work for the duration of furlough;

  • The agreement to furlough only needs to be confirmed by the employer in writing. For the avoidance of doubt and to avoid employment law implications, we suggest that that the furlough agreement template which we previously published in our legal updates should still be used for claims under the current Scheme;

  • The second Direction confirms the Scheme in the present form runs till 30 June;

  • It clarifies that an employer and an employee on SSP can agree an end date for the period of incapacity so that the employee can be put on furlough;

  • The Direction also clarifies that if an employee’s unpaid leave started before 1 March, and the employer and employee agreed before 20 March to end it earlier than originally planned, the furlough period can start after the modified date;

  • The Direction confirms that the claims through the Scheme cannot include certain statutory payments, SMP is one of them.

 

Authors: Kiril Moskovchuk

Published: 02 Jun 2020

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