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CJRS Update: Flexible Furlough

02/07/2020

At a glance

On 25 June 2020, HMRC published a Treasury Direction, updating the original Coronavirus Job Retention Scheme (CJRS) Direction (previously reported here) to enable employers to place employees a on part-furlough/part-work arrangement (“flexible furlough”) from 1 July 2020. New government guidance on the CJRS was issued on 1 July 2020. Our Employment team summarise the key points and practical steps for employers to consider, below.

Flexibly Furloughed Employees

From 1 July 2020, employees that had previously been furloughed for at least 3 weeks prior to 1 July 2020 can be put on flexible furlough. It is not possible to add new employees on to the furlough scheme unless the employee is returning from maternity or other family-based leave and has agreed to be furloughed on their return.

As opposed to ‘full time’ furloughed employees, flexibly furloughed employees are employees who are not on furlough for the whole of a CJRS claim period but who return to work on a ‘part-time’ basis at any time during the course of each of the months of July, August, September or October 2020.

The Treasury Direction leaves the meaning of ‘part-time’ work for the purposes of flexible furlough for employers to determine. There is no requirement for a minimum or maximum number of working hours in order to qualify for flexible furlough. This means that a full time employee who is flexibly furloughed could, for example, return to work for the equivalent of one day a week, with the employer paying the employee’s normal pay for that one day, and HMRC covering their normal pay for the other four working days (up to the capped limit of financial support under the CJRS which will taper down in September and October 2020). The government have updated their CJRS calculator to assist employers calculating flexible or full time furlough pay, available here.

Flexibly furloughed employees can continue to undertake volunteer work or training whilst on furlough, provided it does not generate revenue for the employer. From 1 July 2020, furloughed employees can be rotated more regularly than the 3 week minimum period which previously applied for ‘full time’ furloughed employees. However, the number of furloughed employees that an employer can claim for cannot exceed the maximum number that it furloughed in any previous claim.

Flexible Furlough, Redundancy and Notice Pay

The amended Treasury Direction states that ‘integral to the purpose of the CJRS is that the amounts paid to an employer…are used to continue the employment of employees in respect of whom the CJRS claim is made.’

The government confirmed in their updated guidance on 17 July 2020 that the CJRS can be used in relation to paying departing employees’ contractual and statutory notice pay and during redundancy consultation as the employment of these employees is continuing until the end of the notice period or redundancy procedure. However, grants cannot be used to substitute redundancy payments.

Practical Steps for Employers

  1. Employers who intend to keep employees furloughed on a full time basis should check existing furlough agreements and consider whether employees need to be notified of any extension to their furlough period (if this is specified). Remember that:
  • from 1 August 2020, employers will not be able to reclaim employer NICs and minimum pension contributions from furlough leave pay;
  • from 1 September 2020, HMRC will pay 70% of wages up to a cap of £2,187.50 per month, with employers being required to pay 10% of wages to make up 80% total up to a cap of £2,500 per month; and
  • from 1 October 2020, HMRC will pay 60% of wages up to a cap of £1,875 per month, with employers being required to pay 20% of wages to make up 80% total up to a cap of £2,500 per month.
  1. Employers who wish to place employees on flexible furlough will need to enter into new flexible furlough agreements before employees begin working on a part-work/part-furlough basis. The flexible furlough agreement can be drafted to accommodate variable hours or shift patterns of employees. Remember that for any worked hours, employees should be paid by their employer in accordance with their employment contract, and employers will be responsible for paying the tax and NICs on all amounts paid to employees.
  2. Employers who propose bringing employees out of furlough, given the easing of restrictions in relation to non-essential businesses from 4 July 2020, should carefully consider the decision making processes behind who to bring back and ensure that communications are made to returning employees in a timely manner.

If you have any further queries about the flexible furlough scheme, please get in touch with our Employment team.

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