Furlough update

Nearly 25% of all UK employees have been furloughed, according to HMRC. With ‘lockdown’ being slowly lifted but pessimistic outlooks for the economy, the winding-up of the Coronavirus Job Retention Scheme (CJRS) is set to conclude in October. Ahead of that, significant changes to the scheme were announced on Friday evening (29 May). Here’s our round up of the headlines of the announcement and other key developments for you.

The scheme has been extended for four months, until the end of October 2020.  The scheme in its current form will continue until the end of July, although no new entrants to the scheme can be admitted from 1 July. From that point, only employers will only be able to use the scheme for staff who have been furloughed for at least three weeks prior to 30 June. This means that if you want to include any staff who have not previously been ‘furloughed’, the latest date you can do so is 10 June.

Claim periods will no longer be able to overlap months from 1 July. If you have previously made claims which have overlapped calendar months, this will no longer be possible.

From 1 July (a month earlier than anticipated) ‘flexible furlough’ will be introduced so that those employees who have been furloughed can return to work on a part-time, or shift basis. The full details of how this will work are expected later in June. It is expected that the employer will be responsible for pay for hours worked and the CJRS will meet the shortfall, or 80% of it, although we wait for the detail to be confirmed.

From 1 August the payments which employers can claim will start to taper off and, whilst 80% of salary can still be claimed, employers will no longer be able to claim employer national insurance  contributions or pension contributions.

1 September sees a further drop in government contributions. Employees will still be entitled to receive 80% of salary, but employers can only claim 70% from CJRS, being responsible for the remaining 10% themselves.

In October the government contribution drops again, to 60%, with employers to make up the 20% shortfall. The cap on the total amount to be paid by CJRS will also drop to £1,875 and will be proportional to the hours not worked.

We will bring you further updates when the full guidance is published on 12 June. For now, here’s a round-up of key questions.

Will I need a new agreement with my employees if they move to ‘flexible furlough’?

Yes, since this will amount to a change in terms and conditions, you should ensure that a written agreement is in place. Although the scheme’s requirement for written agreement was watered down recently, our view is that it is preferable to ensure you have agreement in writing in case of any later dispute.

Can I use the flexible furlough scheme for employees who have not been furloughed so far?

No, if they have not been ‘furloughed’ by 10 June, you will not be able to put them on flexible furlough.

Can I move staff on and off furlough after 1 July?

Yes, it appears that you will be able to continue to do so, as long as the total number on furlough does not exceed the total of any month you have claimed to date, as long as all relevant employees have taken a previous period of furlough before 30 June.

Do I need to organise the flexible furlough in periods of three weeks?

No, the government announcement suggests that you may be able to use the scheme for a period of one week or more, which is more flexible than the existing arrangements, which need to be for a minimum of three weeks. We will update you when the guidance is available.

Does furlough leave need to be extended by three weeks at a time?

No.  A period of furlough can be extended by any amount of time while an employee is on furlough, once they have been off for at least three week. This means that if an employee remains on furlough (and does not return to work) the extension itself does not need to be a minimum period of three weeks.

Can I require a furloughed employee to take annual leave?

Yes, but care is needed on a number of points.  Government guidance has made it clear that furloughed workers continue to accrue entitlement to statutory annual leave under the Working Time Regulations 1998 (WTD), and that furloughed workers can take holiday without bringing the period of furlough to an end.  Given the recent extension of the CJRS many employers are concerned about the impact of employees accruing eight months’ worth of holiday when they return to work or their employment ends.

New guidance states that employers can require workers to take holiday while on furlough, provided the correct notice is given by the employer (which is at least twice as many days before as the amount of days they need people to take), but notes that ‘the employer should consider whether any restrictions the worker is under, such as the need to socially distance or self-isolate, would prevent the worker from resting, relaxing and enjoying leisure time, which is the fundamental purpose of holiday’. This may be a difficult assessment for an employer to make and the guidance unhelpfully does not provide examples of what would, and would not, amount to preventing an employee from relaxing and enjoying their annual leave in accordance with the requirements of the WTD.  However, given the current relaxation of the lockdown rules, for example, entitling an employee to take unlimited outdoor exercise, it may be harder to sustain the argument that they cannot relax and enjoy their annual leave while furloughed (but does not assist with those who must self-isolate during furlough).

Can I pay my employee’s 80% of their salary as holiday pay?

No.  The new Government guidance has made it clear that if you have an employee furloughed receiving 80% of their full pay whilst on furlough, they must receive ‘the correct holiday pay in accordance with current legislation’, which is based on normal remuneration. It notes that, where this calculated rate is above the furlough rate of pay, the employer will have to pay the difference but will still be able to claim up to 80% (or £2,500 per month) under the CJRS.  The fact that employees will receive full pay means that they will be more far likely to accept employer required holiday leave.

Can employers start collective consultation with employees if redundancies are proposed?

Yes.  The Government have clarified that employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers while they are furloughed, if they do not provide services to generate revenue for or on behalf of their employer.

What about an employee who transferred under TUPE?

A new employer can claim under the CJRS in respect of employees of a previous business who TUPE transferred after 28 February 2020 (this date had been changed to 19 March 2020 by the 15 April 2020 version of the guidance). The reversion to the original date of 28 February 2020 is likely to be welcomed by employers who acquired transferred employees between 28 February and 19 March 2020 and found themselves unable to claim under the CJRS due to not making an RTI submission in time.

 

If you would like further advice tailored to your particular circumstances, please contact us.