The Flexible Furlough Scheme will be available to employers as from 1st July 2020.
Using helpful headings, Hill HR have put together some frequently asked questions for employers to refer to.
What is flexible furlough?
From the 1st July, employers will have the option of using flexible furlough. This is where you can bring staff back to work on less hours, but still use the furlough grant. You can only apply the grant to those staff who have been previously furloughed prior to 30th June 2020 for a full 3 weeks.
What hours can staff work on flexible furlough after 1st July?
You can decide the hours and shift patterns to be worked to suit the needs of your business. You will pay the wages for the time staff are in work and can apply for a job retention scheme grant to cover any of their usual hours they are still furloughed for.
What if staff previously furloughed are since back at work. Can we still flexible furlough them?
Yes, provided they were previously furloughed for a consecutive 3-week period at any time between 1st March and 30th June. Employees do not need to have been on furlough on 30th June in order to continue in the scheme from 1st July.
Can we continue to rotate employees on furlough?
Yes, provided all the employees you wish to rotate on furlough from July have been furloughed for a period of 3 consecutive weeks at some point before 30th June. From 1st July, you have more flexibility and can, for example, rotate employees between work and furlough on a weekly basis.
How long does someone need to be on furlough for to enable us to claim the grant?
Up until 30th June, when you furlough you must do so for a 3 week period in order to claim the grant. However, under the flexible furlough rules, the claim period will only be 1 week.
Do I have to use flexible furlough after 1st July?
No, you will still have the option to keep employees on full furlough if you need to.
We want to take up the flexible furlough option. What do we need to do?
The guidance states that you need a “new written agreement” to confirm the new furlough arrangement. It is not clear if you need separate agreements each time you amend the flexible arrangement (which would be really cumbersome) or if you can make provision for this in one document which provides for flexibility which would make much more sense.
The agreement will need to cover the hours they will be working and the hours they will be furloughed.
You will also need a system for calculating hours worked and not worked (see below on calculating hours).
Note that employees will only be eligible for flexible furloughing from 1st July if they were previously furloughed for a continuous 3-week period at some point prior to 30th June (unless they are returning from maternity leave or other family leave – see below).
Is there a minimum or maximum number of working hours for employees on flexible furlough?
No, you can agree any working arrangement with an employee on flexible furlough, and this can change from week to week.
Who can I claim for?
The number of employees you can claim for in any claim period starting from 1st July 2020 cannot exceed the maximum number of employees you claimed for under any claim ending by 30th June 2020. This may differ where you have an employee returning from family related leave.
What is the minimum furlough and claim period?
Until 1st July, employees must be furloughed for a minimum of 3 consecutive weeks and claims through the portal must be made for a minimum 3-week claim period.
From 1st July, the new rules are that:
- There is no minimum number of weeks or days that an employee must be on furlough.
- However, any claim through the portal will need to cover a period of at least one week unless you are claiming for the first few days or last few days in a month. (You can only claim for a period of fewer than 7 days if the claim period includes either the first or last day of the calendar month, and you have already claimed for the period immediately before it.)
- Claim periods must start and end within the same calendar month.
What is the maximum number of employees we can claim for?
From 1st July, you will not be able to claim for more employees than the maximum number you have claimed for under any previous claim.
For example, if up to 30th June, you have only claimed for 10 employees on furlough (even if that has involved rotating furlough), after 1st July, your maximum claim will be 10.
There is an exception where you have an employee returning from maternity leave, or other family leave – see below.
What can we claim for an employee on flexible furlough through the scheme?
You will be able to claim the grant for the hours your employees are not working calculated by reference to their usual hours worked in a claim period. The grant and cap will be reduced in proportion to the hours not worked. For example, an employee is entitled to 60% of the £2,500 cap if they are furloughed for 60% of their usual hours.
What are the deadlines that I need to claim by?
You have until 31st July to make any claims for periods ending on or before 30th June. The first time you will be able to make a claim for days in July will be 1st July.
After 1st July, you can’t 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.
We agreed to top up salary to 100%. Do we need to continue this arrangement until the end of October?
No, but you may need a new or extended furlough agreement if you want to reduce furlough pay between now and October (depending on how the terms of the existing agreement were framed).
What does the furlough grant not pay for?
The furlough grant cannot be used for redundancy payments, pay in lieu of notice or pay in lieu of holidays at the end of employment.
The scheme will remain the same until 31st July. On the 1st August employers will need to make contributions.
What contribution will we need to make when the scheme changes in August?
The required employer contributions will be as follows:
- From 1st August: employer national insurance and pension contributions
- From 1st September: 10% of employee wages (up to £312.50) plus employer national insurance and pension contributions
- From 1st October: 20% of employee wages (up to £625) plus employer national insurance and pension contributions
What are our options if we cannot afford to make the minimum contribution required?
The employer contributions from August are mandatory if employees are receiving the grant. If you cannot make your contribution, then you will need to remove employees from the furlough scheme and consider your other options such as agreeing new terms and conditions or redundancies.
How much is the subsidy?
Currently, HM Revenue & Customs (HMRC) will reimburse 80% of furloughed workers’ regular wages, up to a cap of £2,500 (gross) per worker per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer contributions on that wage.
From 1 August, the Government will stop covering employer national insurance and pension contributions.
In September, the Government will reduce their contribution to 70% (up to a cap of £2,187.50) and from 1 October, the Government will again reduce their contribution to 60% (up to a cap of £1,875).
The employer is required to contribute the shortfall to ensure the employee continues to receive 80% of their regular wages (capped at £2,500) as well as the employer national insurance and pension contributions.
Holidays and furlough
Will workers continue to accrue holiday allowance while they are part furloughed?
Yes, they will accrue holiday as normal.
How will flexible furloughing affect holiday from 1 July?
The new guidance does not deal specifically with how flexible furlough arrangements impact on holiday. However, as with the current scheme, employees taking leave whilst on part furlough should be paid their usual holiday pay rate, not the reduced furlough pay.
How will it work in practice?
Employees are able to request leave whether it falls in their working or non-working hours. On working hours, leave is paid as usual, at full holiday pay. On the non-working days (i.e. when part furloughed) you can claim the grant for 80% of the holiday pay and top up the remainder.
Can we still require our staff to take holiday on part furlough?
Yes, you can use flexible furlough for staff holidays. Ensure you give them the required notice (twice notice as leave) and ensure you top up pay correctly.
What about bank holidays during part furlough?
If employees normally work on bank holidays, they will simply be on furlough leave (not holiday) on the bank holiday unless you require them to take a holiday. If employees have the right to take bank holidays off as holidays, then the holiday guidance says that the employer has two options. You can agree with the employee to take the bank holiday as annual leave or require them to take it by giving notice and pay correct holiday pay for that day. Or you can agree that the employee defers the holiday to another date and pay furlough pay only on that day.
Other staff situations
Who should stay on full furlough?
Clinically extremely vulnerable employees (who are shielding) should remain on full-time furlough. Other employees may not be happy or able to return to work on a part-time basis or rotation because, for example, they are clinically vulnerable, will not be able to manage their caring responsibilities or because they would need to travel on public transport and don’t feel safe.
What about employees who are shielding?
After 1st July, you can continue to furlough shielding employees so long as you have previously submitted a claim for them of at least 3 consecutive weeks taking place any time between 1st March 2020 and 30th June.
Who about employees who have caring responsibilities?
After 1st July, you can continue to furlough employees with caring responsibilities (e.g. childcare) so long as you have previously submitted a claim for them of at least 3 consecutive weeks taking place any time between 1st March 2020 and 30th June.
I have staff returning from family leave after 1st July. Can I furlough them?
Yes, the Government have made an exception to the deadline of 10th June rule. Parents who are on statutory maternity, paternity or adoption leave and due to return to work in the next few months will still be eligible for the furlough scheme after it otherwise closed to new entrants on 10th June. However, this only apply in companies where other staff have been furloughed. It would not apply if the returning parent was the only person the company wished to furlough.
Calculating hours of work and non-work
How do we calculate usual hours for salaried employees?
You need to start by calculating usual working hours for the period you are claiming for. For salaried employees, whose pay is fixed and does not vary by hours worked, the guidance says that this is based on the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.
HMRC has produced examples of how to do the calculations.
Our salaried employees are contracted to work whatever hours are required. How do we work out their usual hours?
The sensible approach is to use the core, basic or notional hours stated in the contract (e.g. 35) even if the reality is that these employees would usually work longer hours. This is likely to be the approach you will have taken when calculating their contracted hours for gender pay gap reporting purposes. You could create problems for yourself in any subsequent HMRC audit if you claim a higher number of usual hours for the furlough scheme that you have stated for gender pay gap reporting purposes.
How do we calculate usual hours for employees whose hours and pay varies?
For employees who work variable hours, usual hours are not based on the hours you predict that they would have worked in the claim period if they had not been furloughed. Nor can you simply agree the usual hours with an employee in their flexible furlough agreement.
Instead, you have to calculate usual hours by looking backwards at the usual hours they worked last year. You must therefore calculate usual hours based on the higher of either:
- the average number of hours worked in the tax year 2019 to 2020
- the corresponding calendar period in the tax year 2019 to 2020
HMRC has produced examples of how to do the calculations.
Note that you include any fully paid leave and overtime, provided the overtime payment was not discretionary (this means that you include voluntary overtime provided the employee is paid an agreed contractual rate for overtime). The guidance points out that you should have been providing itemised payslips to employees from April 2019 recording hours worked.
The calculations are complicated and require you to take account of non-working days, which may lead to surprising results.
How do we calculate the unworked hours that we can claim for through the scheme?
To calculate the number of not-worked hours (which you can claim for through the furlough scheme), you need to start with the employee’s usual hours in the claim period and subtract the number of hours they actually worked in the claim period (even if this is different to what you agreed).
HMRC has produced examples of how to do the calculations.
The fact that the calculations require you to take account of non-working days can lead to surprising results. This is best illustrated by HMRC’s own detailed worked example of an employee who is flexibly furloughed. The employee in this example is asked to return to work half days, so you might think that the number of working hours and furloughed hours would be the same, and that furloughed hours would be exactly half of the usual working hours. In fact, however, this is not the case. In the example given, this employee is working half days for the whole of July, but his actual working hours come out at 92, whereas his furloughed hours come out at 86.
Does this mean we have to start monitoring and recording working hours for salaried employees when we’ve not done this before?
In theory, yes, because the flexible furlough scheme is based on unworked hours. However, in practice we think it will be open to you to use a daily system for these employees (although we cannot be certain of this pending further clarification). For example, these employees are likely to have a notional, core or basic day. In practice, it is likely to be easiest to agree a flexible furloughing arrangement which is based on days (e.g. working Mondays and Tuesdays, furloughed on Wednesdays, Thursdays and Fridays). You would then calculate worked and unworked hours based on the notional daily hours. You will need to be careful to avoid anything which could be seen as scheme abuse, for example, expecting employees to work longer days than they would usually work on their non-furloughed days.
We can open from 15 June, but we don’t have enough work for everyone. We want to flexibly furlough staff from July but what can we do in the meantime?
Frustratingly, the option to flexibly furlough employees is only available from 1 July despite many businesses receiving the green light to operate again from 15 June. That means the options are:
- End furlough for some staff who return to work full-time and keep other staff on furlough (with a rotation if necessary).
- End furlough for all staff and ask employees to return part-time, receiving wages only for the hours worked (this would require employee agreement). When flexible furlough is possible from 1 July, you could place staff back on furlough and claim the grant for the hours not worked.
Who comes back to work and on what pay?
Bringing furlough to an end
What happens at the end of the furlough scheme in October?
The idea is that employees will be able to come back to work.
However, if trading conditions have not improved sufficiently for you to take all the furloughed employees back when the scheme ends then you may need to consider redundancies.
Can we make employees redundant whilst still on furlough and carry out consultation about this?
Yes, you can carry out the redundancy consultation meetings, give notice and make staff redundant on furlough.
Redundancy consultations are not classed as work. In addition, employee representatives may still undertake duties and activities for the purpose of individual or collective representation of employees or other workers while they are on furlough so long as this is not providing services to or generating revenue for the employer or a linked/associated organisation.
If you need any support and advice with furlough, please contact the team at Hill HR
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