Furlough scheme amended - Flexible Furlough
As promised the government updated the guidance on the Furlough Scheme on 12th June and released it over the weekend. The update was long and contained many examples so if you would like to read the full document please follow the link
Otherwise we have summarised below the main areas you need to be aware of.
Changes to the Coronavirus Job Retention (Furlough) Scheme (CJRS)
From 1st July businesses will be able to bring back employees on a part-time basis. The employees can return for any amount of time and any shift pattern, while still being able to claim CJRS grant for their normal hours not worked. The requirement of minimum period of furlough for three weeks is now removed from 1st July hence flexible furlough.
But to reclaim under the scheme you must have previously successfully furloughed that employee at least for three weeks. In other words, no new employees to be furloughed in the July claim and afterwards.
For employees that meet the criteria the number of employees an employer can claim for in any single claim period after 1st July cannot exceed the maximum number of employees in any claims in the past!
Although flexible furlough agreements can last any amount of time, unless otherwise specified the period that you claim for must be for a minimum claim period of 7 calendar days. The exceptions would be if you are claiming for the first few or the last few days of the month.
So, worth noting that after 1st July, employers cannot make claims that cross calendar months and all old claims to end of June will need to be submitted by end of July.
The calculations going forward for flexible furloughs will change based on actual hours v. usual hours and then depending on whether the employee is on fixed or variable hours.
The scheme shuts on Halloween, i.e. 31st October but until then the following schedule will follow:
June & July– no changes to the grant levels
August – The grant will no longer cover the Employer’s National Insurance Contributions or Employer’s pension payments. Employers will pay this for the hours on furlough.
September – Businesses will pay 10% of the wages of the furloughed employees so Government only covers 70% to a cap of £2,187.50. Employers will continue to pay the National Insurance and Pension costs mentioned above.
October – The businesses contribution will increase to 20% of the wages of the furloughed employees so the Government only covers 60% to a cap of £1,875.
Currently the government covers 80% of the wages to a cap of £2,500 and going forward from July wages are capped proportional to the hours an employee is furloughed. So, for example if an employee works 40% of the usual hours and are placed on furlough for 60%, they will be entitled to 60% of the £2,500 cap.
If you make an error when claiming
If you have made an error in a claim that has resulted in an overclaimed amount, you must pay this back to HMRC.
You can now tell HMRC about an overclaimed amount as part of your next claim. You will be asked when making your claim whether you need to adjust the amount down to take account of a previous error. Your new claim amount will be reduced to reflect this. You do not need to take further action but should keep a record of this adjustment for six years.
If you have made an error that has resulted in an underclaimed amount, you should contact HMRC to amend your claim. As you are increasing the amount of your claim, they will need to conduct additional checks.
If you have made an error in a claim and do not plan to submit further claims, HMRC are working on a process that will allow you to let them know about your error and pay back any amounts that you have overclaimed. You will need to keep a look out for the guidance as it is updated.
Furloughed employees continue to accrue leave as per their contract. Although the agreement can be varied as part of the furlough leave, most employees will be entitled to statutory paid annual leave which includes bank holiday.
Employees can take holidays whilst on furlough and as an employer you need to plan the return to work for your team that are on furlough and accrued holidays should be part of the discussion.
The working time regulations state that employees are paid for holiday at the normal rate of pay. Therefore, during furlough, any holidays taken will need be paid at the normal rate so hence employers are obliged to pay additional amounts over and above the grant. This would have applied to the Easter and May bank holidays and if you have not already topped up the furlough payments then you need to do so.
If we are processing the payroll for you then please can you speak to your normal payroll contact about your agreement with your furloughed workers.
As a reminder those employees that are on furlough still have the same rights to benefits like SSP, maternity and parental leave rights, redundancy process and payments and of course rights against unfair dismissal.
HMRC will continue to monitor schemes after the closing date. You are therefore required to keep records for 6 years just like most other tax records.
The furlough calculations are going to get quite complicated going forward as employers start adopting the flexible furlough. Care needs to be given to the calculations. Of course, if we are processing your payroll we are currently working on the implementation of the new rules and therefore the calculations.
If we are not assisting you with your payroll, and you are doing this yourself please read and follow the examples on the guidance (link at the top) and go the pages marked Steps to take before calculating your claim.
If you would like to discuss any particular aspect the please email Priya at firstname.lastname@example.org