On 12 May 2020, the Chancellor announced that the Coronavirus Job Retention Scheme (CJR Scheme) would be extended until the end of October 2020. On 29 May 2020, he announced further details of the changes the extended scheme encompasses, including a tapering of government support and the flexibility to bring employees back to work on a part time basis.
Critically, he also announced that, from 1 July 2020, the CJR Scheme will only be available in respect of employees who have been previously furloughed for the minimum period of three weeks. This means that 10 June 2020 is the last date on which an employee may be furloughed for the first time.
Tapering of government grant
Currently, employers can apply for a grant under the CJR Scheme to cover 80% of the wages of furloughed employees (subject to a cap of £2,500 gross per month per employee), together with the employer National Insurance Contributions (NICs) and certain employer pension contributions.
From 1 August 2020 the level of grant available under the CJR Scheme will be tapered; although, crucially, furloughed employees will continue to receive the same level of financial support. Employers will be required to make up the difference between the reduced grant and the amount received by individuals.
The CJR Scheme grant will be tapered as follows:
- From 1 August 2020, the grant will still cover 80% of wages up to a cap of £2,500 gross per month per employee. However, from this date, employers will be responsible for all employer NICs and pension contributions.
- From 1 September 2020, the grant will reduce to 70% of wages up to a cap of £2,187.50 gross per month per employee. Employers will be responsible for all employer NICs and pension contributions and for the remaining 10% of wages (to ensure a total payment to each furloughed employee of 80% of wages up to a cap of £2,500 gross per month).
- From 1 October 2020, the grant will reduce to 60% of wages up to a cap of £1,875 gross per month per employee. Employers will be responsible for all employer NICs and pension contributions and for the remaining 20% of wages (to ensure a total payment to each furloughed employee of 80% of wages up to a cap of £2,500 gross per month).
It will still be open to employers to “top up” employee wages above the level of the CJR Scheme grant at their own expense.
The Chancellor has introduced the new concept of “flexible furloughing” to provide employers with the flexibility to bring back furloughed employees on a part time basis, while still accessing government support to cover a proportion of their employees’ wages when they are not required to work.
During his announcement on 29 May 2020, the Chancellor gave the following example of how flexible furloughing may apply: “if you are watching at home and on furlough, your employer could bring you back two days a week. They would pay you for those two days as normal, while the furlough scheme will continue to cover you for the other three working days.”
Employers were previously required to enter into furlough agreements which expressly stated that employees were not permitted to work for the employer while furloughed. If an employer wishes to implement flexible furloughing, they will need to enter into new agreements with their employees, setting out those flexible furloughing arrangements.
Further details on flexible furloughing are due to be published on 12 June 2020. We set out below what is known so far:
- From 1 July 2020, employers will be able to agree any working arrangements with previously furloughed employees. Employers may decide the hours and shift patterns which an employee will work on their return, subject to reaching agreement with each employee. This agreement must be confirmed in writing.
- Employees will be entitled to their normal pay for the hours they work (calculated in accordance with their contract of employment) and their employer will be responsible for paying them for these hours and for the employer NICs and pension contributions due on these amounts.
- If there are pay reductions in place (outside of the furlough scheme) it is unclear whether the pay to which an employee would be entitled for their working hours would be calculated on the basis of their earlier and higher contractual pay or on the basis of the reduced pay. It is also unclear what impact salary sacrifice arrangements will have on the calculation of pay for working hours.
- Employers will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked. Employers will then be able to claim a grant under the CJR Scheme for remainder of the employee’s “usual hours” when they are not required to work (the “furloughed hours”). The CJR Scheme grant will be subject to the existing monthly cap of £2,500 gross per employee, and this cap will be proportional to the hours not worked (for example, if the employee works 40% of the week, their furlough pay will be capped at 60% of £2,500, i.e. £1,500).
- It is unclear what evidence will be required to evidence an employee’s “usual hours” and also how flexible furloughing will apply to those employees without regular hours or pay.
- Employers should retain detailed records of an employee’s working hours during any period of flexible furloughing, in case HMRC audits an employer’s claim.
- The minimum period for making a claim under the amended CJR Scheme is one week. The reason given for this is to enable grants to be calculated accurately across working patterns. This is a minimum period and employers are still able to make claims in respect of longer periods, such as monthly claims.
- However, from 1 July 2020, claim periods will no longer be able to overlap months. Employers who previously submitted claims with periods that overlapped calendar months (e.g. 21 April 2020 – 20 May 2020) will no longer be able to do this. This suggests that employers will only be able to make claims that relate to a maximum of one calendar month (e.g. 1 September 2020 – 30 September 2020). The government’s Coronavirus Job Retention Scheme Factsheet issued on 29 May 2020 (the “Factsheet”) states that, “Employers will have until 31st July to make any claims in respect of the period to 30 June.”
- To avoid abuse of the CJR Scheme, employees who believe they are not getting 80% of their pay can report any concerns to the HMRC fraud hotline.
Considerations before implementing flexible furloughing
Employers should discuss a potential return to work as early as possible with employees, including on a part-time basis and even if the employees will be required to work from home initially. Employers should also ensure they carry out the required health and safety consultation in relation to employees returning to work.
Flexible furloughing will not be appropriate for all employees. Where there are health and safety concerns about an individual returning to work, it may be appropriate that they remain on furlough on a full-time basis (such as those employees who are clinically extremely vulnerable). Some employees may not be able to return to work, even on a part-time basis, if they need to care for young children who are unable to return to school or nursery. Employers should consider each situation on a case by case basis.
Where an employer needs to select which furloughed employees to bring back to work on a part-time basis it should be alive to the risk of unlawful discrimination. Options might be to seek volunteers for flexible furloughing and/or to share working hours or shifts out equally amongst those furloughed.
Employers may also find some employees are resistant to flexible furloughing, preferring to remain furloughed on a full-time basis until the CJR Scheme expires at the end of October. Genuine health and safety concerns should be taken into consideration, but ultimately disciplinary action may be appropriate if the employee is acting unreasonably in refusing to return to work.
Conversely, flexible furlough may work out to be financially beneficial, especially for higher earners. If pay cuts have been implemented across the workforce there may be scenarios where higher earners brought back on a flexible furlough basis may be entitled to higher total pay than those working full-time, which may raise fairness issues across the workforce.
To date, no guidance has been issued about whether furloughed employees may continue to work for other employers during any part of the week when they are furloughed under a flexible furloughing arrangement. Employers should be aware of the risk of employees breaching the 48-hour limit on average weekly working time under the Working Time Regulations 1998.
CJR Scheme closing to new entrants
The CJR Scheme will close to new entrants from 30 June 2020. Following this date, employers will only be able to furlough employees whom they have furloughed for a minimum period of three weeks prior to 30 June. This means that the final date by which an employer can furlough an employee for the first time will be the 10 June.
Nowhere in the Factsheet or guidance issued on flexible furloughing to date expressly requires an employee to be furloughed on 30 June 2020 in order for their employer to be able to claim a grant in respect of that employee under the CJR Scheme. Our view is that an employee who has previously completed a minimum of three weeks’ furlough leave, but is currently back working, can be subsequently re-furloughed under the CJR Scheme after 1 July 2020 (for example, in a scenario where employees are being rotated in and out of furlough). However, without further guidance, this position is uncertain. Frustratingly, that further guidance on the CJRS Scheme is expected on 12 June 2020, two days after the final date on which employees need to be furloughed in order to complete a minimum three-week period before the CJR Scheme closes to new entrants.