On 29 May 2020, the Chancellor announced that, from 1 July 2020, employers would be able to bring furloughed employees back to work on a flexible furlough basis, meaning they could work part of their usual working hours and be furloughed for the remainder. We reported on this announcement here. Guidance on this aspect of the extended Coronavirus Job Retention Scheme (“CJR Scheme”) was published on 12 June 2020 and we set out below what employers need to know.
What is flexible furloughing?
Flexible furloughing enables an employer to agree a part-time working arrangement with an employee. The employer will pay the employee their normal pay for the hours they work and will be responsible for paying the employer National Insurance Contributions and employer pension contributions due on these amounts.
The employees can be furloughed for the remainder of their usual working hours and their employer will be able to claim a grant under the CJR Scheme to cover a proportion of the wage costs in respect of these furloughed hours. The grant will be subject to the relevant monthly cap (currently £2,500 gross per employee until 31 August 2020) pro-rated to the proportion of an employee’s usual working hours that the employee spends furloughed (for example, if the employee is furloughed in July for 60% of their usual working hours, the CJR Scheme grant will be capped at 60% of £2,500 for that employee, i.e. £1,500).
The employee will be entitled to receive 80% of their normal pay for the hours they are furloughed.
Which employees are eligible to be flexibly furloughed?
Only employees who have previously been furloughed for at least three consecutive weeks taking place any time between 1 March and 30 June 2020 are eligible to be flexibly furloughed. This means that the last day on which an employee could have started furlough for the first time was 10 June.
The one exception to this rule is for employees returning from statutory parental leave, including maternity, shared parental, adoption, paternity or parental bereavement leave. An employer may furlough an employee returning from statutory parental leave after 10 June, even if they are furloughing them for the first time, provided the employer has previously submitted a claim for another employee in their organisation in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March and 30 June. This rule will unfortunately exclude individuals returning from statutory parental leave to an organisation which has not previously furloughed anyone.
What flexibility does an employer have in agreeing working arrangements?
When the Chancellor first announced the option of flexible furloughing, he emphasised that employers would be able to “decide the hours and shift patterns their employees will work on their return, so that they can decide on the best approach for them.” The updated Guidance also confirms that employees can enter into a flexible furlough agreement more than once, meaning that furlough and working arrangements can be fluid and adapt to the needs of the employer’s business as it recovers from the impact of the pandemic.
However, by introducing a maximum cap on the number of employees that may be furloughed in any claim period, the government has inadvertently limited an employer’s discretion. From 1 July 2020, the number of employees in respect of which an employer may submit a claim under the CJR Scheme in any single claim period cannot exceed the maximum number of employees in respect of which the employer has previously claimed in a single claim period. For example, if an employer had previously submitted three claims between 1 March and 30 June, in which the total number employees furloughed in each respective claim was 30, 20 and 50 employees, the maximum number of employees that the employer could furlough in any single claim starting on or after 1 July would be 50.
Limiting the number of employees that may be furloughed in this way will, for example, prevent an employer which has previously furloughed half its workforce on a rotational basis (say, three weeks’ work followed by three weeks’ furlough) from being able to bring back 100% of its workforce on a part-time basis. The employer in this example would need to continue to rotate its workforce in and out of furlough in order to cover the existing number of working hours required instead of being able to share out those working hours across the workforce. The employer would have greater flexibility, however, to increase the frequency of rotation: for example, instead of rotating employees in and out of furlough every three weeks, the employer could now rotate the same employees in and out of furlough on a weekly basis (provided the employer submits weekly claims under the CJR Scheme; see below).
Employers should note that the maximum cap on the number of employees furloughed is applied slightly differently where an employer is claiming for employees returning from statutory parental leave for the first time: in this situation, the maximum number of employees is increased by the number of any employees that the employer is furloughing for the first time due to them returning from parental leave.
Is there a minimum period during which an employee must be furloughed?
Prior to 1 July, the minimum period of furlough leave was three weeks. There will be no minimum period of furlough leave from 1 July. This means that employers have the flexibility to furlough employees for whatever period of time they may agree with the employee, providing the claim period submitted under the CJR Scheme is a minimum of seven calendar days*. For example, an employer may agree to furlough a full-time employee for one day a week and have them work for the remaining four days in that week.
If a previously furloughed employee starts a new period of furlough before 1 July, this furlough period must still adhere to the minimum period of three consecutive weeks, regardless of whether those three consecutive weeks end after 1 July.
From 1 July, employers will not be permitted to submit claims that straddle two or more calendar months; all claim periods must start and end within the same calendar month. Therefore, an employer claiming in respect of an employee who is furloughed for a period that straddles June and July, for example from 22 June until 12 July, will need to submit a claim in respect of the period 22-30 June and a separate claim in respect of the period 1-12 July. Employers have until 31 July to submit claims relating to periods of furlough taking place before 1 July.
*The seven-day minimum claim period does not apply if the employer is claiming for the first few days or the last few days in a month, in which case the period claimed must include either the first or last day of the calendar month, and the employer must have already claimed for the period ending immediately before it.
Does an employee need to agree in writing to be flexibly furloughed?
Previously, to be eligible for the grant under the CJR Scheme, only a verbal agreement was needed for an employee to be furloughed, provided the employer confirmed in writing to the employee that they have been furloughed (or reached collective agreement with a trade union). This remains the case for employees who are to be furloughed on a full-time basis and the updated Guidance expressly states that an employee does not have to provide a written response to the written confirmation provided by their employer.
The Guidance is, however, unclear in relation to the consent required for an employee to be flexibly furloughed. It states that, “If you flexibly furlough employees, you’ll need to agree this with the employee (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement.” This may suggest that, in the absence of a collective agreement, individual written agreements are required between the employer and employee to document the fact and terms of the employee’s flexible furlough working arrangements. A written agreement between employer and employee would, in any event, be sensible, given the need for certainty about the employee’s working arrangements.
Can employees who transfer under TUPE be flexibly furloughed by their new employer?
A new employer is eligible to claim under the CJR Scheme in respect of the employees whose contracts of employment have transferred to the new employer pursuant to TUPE, provided the former employer has previously submitted a claim under the CJR Scheme in respect of those employees and they have completed a period of furlough leave of at least three consecutive weeks taking place any time between 1 March and 30 June. The new employer may agree to furlough the transferred employees on a full-time basis or agree to furlough them on a flexible furlough basis.
In these circumstances, the maximum number of employees for whom the new employer may claim a grant under the CJR Scheme in a single claim period will be the total of (i) the maximum number of employees for whom the new employer claimed a grant in any one claim period ending on or before 30 June; plus (ii) the number of eligible employees who have transferred to the new employer, subject to the maximum cap applicable to the former employer. It would, therefore, be prudent for the new employer to elicit this information prior to purchasing a business. It remains unclear how the former employer’s maximum cap will be applied where only a proportion of their workforce transfer.
How does an employer identify an employee’s usual working hours?
Prior to submitting a claim under the CJR Scheme, an employer will need to identify the employee’s usual working hours in order to calculate for what proportion of those usual working hours the employee will be furloughed in any claim period.
Below, we work through the methodology set out in the updated Guidance to identify the usual working hours for an employee who is contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work.
- Start with the hours for which the employee was contracted at the end of the last pay period ending on or before 19 March 2020:
Example: if an employee is paid monthly, on or around the last day of each calendar month, the relevant pay period will be February 2020: the employee was contracted to work 37 hours per week, Monday to Friday, in February 2020.
37 hours per week
- Divide by the number of calendar days in the repeating working pattern, including non-working days:
The number of calendar days in the repeating work pattern in our example is seven (one week, including Saturday and Sunday).
37 ÷ 7 = 5.2857
- Multiply by the number of calendar days in the pay period (or partial pay period) for which the employer is claiming:
The employer in our example is claiming for the month of July, which has 31 calendar days.
5.2857 x 31 = 163.8
- Round up to the next whole number if the outcome isn’t a whole number.
In our example, the employee’s usual working hours during the period in respect of which their employer is submitting a claim (July)
If an employee with fixed hours was on annual leave, sick leave or on family related statutory leave at any time during the last pay period ending on or before 19 March, their usual working hours should be calculated as if the employee had not taken that leave.
As can be seen, identifying the usual working hours of an employee who works fixed hours for a fixed wage or salary is relatively straightforward. However, the exercise becomes more complicated where the employee works variable hours or is paid per task or piece of completed work. The updated Guidance provides several worked examples of how to identify an employee’s usual working hours in a number of different contexts. It will be the employer’s responsibility to accurately identify the usual working hours of each employee who is flexibly furloughed. This could be a timely endeavour depending on the complexity of working arrangements within an employers’ workforce. We suspect that many employers will not welcome this additional administrative burden, especially during a time when many struggling businesses have reduced the capacity of their business services or administration resources.
What should the employee be paid for their working hours?
The updated Guidance confirms that an employer must pay the employee their contractually agreed rate for any hours they work.
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, but we would assume it would be the reduced pay. It is also unclear what impact salary sacrifice arrangements will have on the calculation of pay for working hours.