We thought it would be useful to provide a short update on the changes to the coronavirus job retention scheme which are coming into effect on 1 July. Full details can be found here.
It’s probably worth a quick recap on where we are with the retention scheme and what businesses are to expect from the changes.
Around a quarter of the UK's workforce is currently furloughed and so the government has begun to shift its emphasis on getting people back to work and this underpins the new changes.
There are two main changes coming into effect:
Employers will need to contribute towards furlough pay; and
A scheme of flexible-furloughing is to be introduced.
Changes to Employer Contributions
From 1 August 2020, employers will need to contribute towards the 80% furlough pay. This will be on a tapered basis over August, September and October.
So beginning in August, employers will need to pay employees national insurance contributions and the pension contributions. This represents about 5% of the gross employment costs for the average claim.
Then in September, the government will only contribute 70% of pay, up to £2,187.50. Remember, furloughed employees will still be entitled to receive 80% of their pay, up to the £2,500 cap. Employers will contribute 10% of pay, which could be up to £312.50 per month for a furloughed employee receiving the full cap.
Then in October, the government will lower their contribution to 60% up to a cap of £1,875 per month. This means employers will contribute 20% of pay, and up to £625 per month.
The scheme then finishes at the end of October.
Flexible Furloughing
The other important change, which will come in from 1 July, is the introduction of flexible furloughing. This will allow employers to bring staff back part time for any hours or shift patterns agreed between the employer and employee.
Employers will bear the cost in full for any hours worked by furloughed employees and can then claim a furlough grant to cover the balance between the hours worked by the employee and the employee’s “usual hours”.
Until 1 July, the minimum length of time an employee can be furloughed is 3 consecutive weeks. However, from 1 July the minimum period has been abolished and furlough periods can last any amount of time.
This gives employers the choice to fully furlough employees, to rotate employees on and off furlough or bring them back on a flexible furlough basis.
As long as your staff have completed three weeks furlough between 1 March and 30 June, you will be able to refurlough them or use the flexible furloughing. If staff have not been furloughed previously, the scheme has now been closed to new applicants and so you will not be able to furlough new staff.
There is no requirement for the employee to be on furlough on 30 June itself to be eligible - they could have been furloughed previously but subsequently brought back to work.
However, there is a cap on the total number of staff a business can have furloughed at any one time – the maximum number a business can claim for is the maximum number of employees on furlough at the same time in any period up to 30 June. So if an employer has 50 employees all of which have been furloughed but the most it had at any one time was 25, only 25 employees can be furloughed at any one time.
Very importantly, if you do want an employee to return on a flexible, part-time basis, you do need their agreement in writing. Previously you only needed to evidence their agreement to furlough in writing but if you are wanting to use the flexible furlough, the guidance states must be a written agreement and you shall need to negotiate those terms with the employee.
We should also mention that there are some quite complex rules relating to how claims are made which reflect the contributions that are required. You should speak to your payroll or accountant for advice on how this might affect you.
So if you have staff on furlough leave, you do need to start thinking about when and how they will return. If you are unlikely to need the staff numbers of staff, you should commence your redundancies now to avoid the contributions – you can also leave staff on furlough leave whilst under notice.
Accrued holidays
Remember, furloughed employees are still accruing their full holiday allowance and if you haven’t done so, you should think about ensuring some leave is taken whilst staff are on furlough leave. You will have to top up their pay to 100% but it does mean it will be subsidised by the furlough grant.
You might want to consider asking staff to use an amount by the end of Augus. Alternatively you could even require staff to take annual leave. You should seek specific legal advice before doing so but generally, an employer can serve twice the length of notice as the holiday the employee is being asked to take – so if you want an employee to take one weeks leave then you would need to give two weeks notice.
There is a caveat on the holiday point – if an employee cannot take their holiday properly due to the current restrictions then it could be open to an employee to challenge whether they had proper and effective annual leave. We think it is unlikely but something you should be aware of.
The government have also made changes to allow employees to roll over any unused holidays into the next holiday year, although this is at the discretion of the employer.
Summary:
From August onwards, employers will need to start contributing to the cost of furlough payments. These are on a tapered basis until the scheme ends on 31 October 2020.
No new employees can now be furloughed, unless they are returning from statutory parental leave.
From 1 July, there is no minimum furlough period and employees can be brought back part-time for any hours or shift patterns agreed between employers and employees. Full furlough will still be possible.
Employers will bear the cost in full for any hours worked by furloughed employees and can claim a furlough grant to cover the balance between hours worked and employee’s “usual hours”.
The new rules on claim periods and the calculations for flexible furlough are potentially complicated, so it is worth spending time now planning staff working arrangements for July onwards and getting your heads around how to claim.
Ensure furloughed staff are taking holidays whilst being furloughed.
If you need to reduce your headcount, now is the time to start any redundancy process.