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Are you up to speed on flexible furlough?

Written by: Joanne Moseley
Published on: 25 Jun 2020

    Joanne Moseley takes a look at the government’s guidance on its new flexible furlough scheme.

    The property and construction industry has taken full advantage of the government’s Coronavirus Job Retention Scheme. According to figures from HMRC, the total cost of the property industry’s furlough schemes is £600m.

    Some £300m has been spent since the scheme started in March, supporting 25,200 agencies, property management firms and other housing sector-related companies, which have added 128,500 staff to the scheme. This does not include the construction sector, which has seen 679,600 employees furloughed.

    Last month, the government announced that the furlough scheme, which pays 80% of the wages of staff employed by companies affected by the pandemic, will be extended by four months to the end of October.

    Until then, it is slowly being wound down, and last week was the last chance agencies had to add employees to the scheme. Meanwhile, thousands of industry staff remained furloughed.

    Essential reading

    Details of the new flexible furlough scheme, available from Wednesday 1 July 2020, have now been published, via updates to existing guides. There are five government documents that employers will need to read to get up to speed. These are:

    Who is eligible to be furloughed under the new scheme?

    Only employees who have been furloughed for at least three weeks on or before 30 June under the old scheme can be furloughed after 1 July. The only exceptions to this are where parents return to work after taking maternity, paternity, shared parental, adoption or parental bereavement leave.

    Duration of furlough

    From 1 July, you’ll be able to bring back previously furloughed employees for any amount of time and on any pattern of work, and claim a grant for the hours not worked. For example, if your employee normally works five days a week and you only need them for two, you can furlough them for the remaining three days. If business picks up, you might want them to work for three days and be furloughed for two. If you can’t bring staff back to work for some of their hours, you can continue to furlough them for all of their hours.

    The last date anyone could be furloughed for the first time was Wednesday 10 June. If you furloughed any employee on that date, you’ll be able to move them onto the new scheme immediately from 1 July.

    However, it’s now clear that if you re-furloughed someone after 10 June, you have to wait the full three weeks before you can move them onto the new scheme, regardless of whether this ends after 1 July. For example, a previously furloughed employee who started a new furlough period on 15 June must remain furloughed under the old scheme until at least 6 July (three weeks). After this date, the employee can be flexibly furloughed for any period.

    Limits on numbers of people that can be furloughed from 1 July

    The number of employees you can furlough in any period starting from 1 July cannot exceed the maximum number of employees you claimed for under the old scheme – although you don’t include returning parents in this calculation.

    This may create some difficulties for employers that have already put in place rotating furlough patterns. For example, if you have divided your 200-strong workforce into two groups of 100 and rotate them on three-weekly furlough, you won’t be able to put all 200 workers on flexible furlough so that everyone works half a week.

    Claim periods

    You must submit any claims under the old scheme by Friday 31 July.

    After 1 July, you cannot submit claims that cross calendar months. This means that if you have staff whose furlough spans June and July, you’ll need to submit separate claims for June and July – even if they have been furloughed continuously.

    Your claim period is made up of the days for which you are claiming a grant. Claim periods starting on or after 1 July must (usually) start and end within the same calendar month and must last at least seven days. You must include all furloughed staff in one claim, even if they are paid at different times, and the government recommends that, if you can, you should match your claim period to the dates you process your payroll.

    One thing to bear in mind is that you can submit a claim up to 14 days before the end of the relevant claim period. However, if you do this and the number of days your staff work changes, you’ll need to adjust the claim next time. That doesn’t sound too difficult if you have over-claimed, but if you have under-claimed then you will have to contact HMRC for help.

    The government therefore recommends that you don’t claim “until you are sure of the exact number of hours [your staff] will have worked during the claim period”.

    Working out pay under the new scheme

    If you do not intend to ask staff to return to work, your pay calculations will not change much, although your contribution will increase from 1 August.

    However, if your staff do return to work part-time, you’ll need to work out how many hours each employee usually works and deduct this from the number of hours they have been furloughed by following a series of complicated stages.

    First of all, you will need to decide if the employee has fixed or variable hours. If their pay depends on the number of hours they have worked, or they are not contracted to work a fixed number of hours, use the variable calculation – otherwise use the fixed hours calculation. The government has provided some examples of how to do this, which include:

    • Examples of pay periods spanning June/July and July/August
    • Example for someone working fixed hours
    • Example for someone without fixed hours
    • Example for someone working fixed hours who is off sick or on family related leave on or before 19 March 2020
    • Example for someone without fixed hours based on average in 2019/20 tax year
    • Example for calculating the number of furloughed hours.

    The calculations are complicated and will take some time to complete unless you have a fantastic payroll system that is capable of doing this for you.

    Keeping records

    You will need to keep a copy of all records (one version of the guidance says for five years, and the other for six years) including:

    • the amount claimed and claim period for each employee
    • the claim reference number
    • your calculations
    • for employees who are flexibly furloughed, their usual hours including any calculations and the actual number of hours they have worked. 

    Written agreement

    The guidance states that you need a “new written agreement” to confirm the new furlough arrangement. Professional advice should be sought on drafting a suitable agreement which gives maximum flexibility.

    Joanne Moseley is an employment law associate at Irwin Mitchell