15 Jun 2020

How will ‘Flexible Furlough’ work?

The government has recently announced more details about the revised Coronavirus Job Retention Scheme, which come into effect from 1 July.

The new so-called ‘Flexible Furlough’ arrangement enables businesses to bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim a furlough grant for the hours not worked.

A price to be paid
While the additional flexibility is welcome – many of the employers to whom we’ve spoken over the last few months expressed an interest in being able to part-furlough some of their staff – there is a price to be paid in terms of the additional complexity of administering the scheme.   As one of our colleagues put it: to say the calculations are complicated would be an understatement, and notably, the nature of the calculation is fundamentally different to claims up to 30 June - even though (for employees who remain on full time furlough through July at least) they should derive the same result. The government’s guidance is detailed and provides examples - but we suspect that some of the calculations will cause HR and finance team considerable headaches.

Note also that, as previously announced, employees who haven’t been on a three-week period of furlough by 30 June will not be covered by the revised scheme, meaning an effective furlough commencement date of 10 June.  One exemption to this restriction covers employees currently on statutory parental leave who return to work after 30 June (and who could therefore not have been furloughed prior to 30 June).

New concepts introduced
Under the revised Scheme, employers will need to send a ‘flexible furloughing’ arrangement letter to affected employees and keep track of hours worked and hours of furlough.

The Scheme currently allows employers to decide how much they pay their employees, but caps their claim to the lower of the amount paid to the employee, £2,500 per month or 80% of their monthly earnings.

From 1 July, employers are required to ensure that each employee receives ‘minimum furlough pay’ for the hours furloughed.  A claim can’t be made if the employee doesn’t receive minimum furlough pay. Employers will need to accurately calculate minimum furlough pay to ensure their claim is not retrospectively denied.

The calculation of minimum furlough pay introduces the concept of ‘usual hours’. The usual hours figure is used to calculate the amount of claim available, and is loosely based on the methods of determining qualifying fixed and variable pay under the current scheme calculations. However, there are different methods to determine usual hours depending on the type of work undertaken by the employee. Each type of work has its own calculation, with the work types being:

  • Employees with fixed hours;
  • Employees with varying hours – this work type has two standalone calculations which are both required to be undertaken; and
  • Piece or task rate workers – identified using the National Minimum Wage interpretation of a piece rate worker.

Sharing the load
The Chancellor has repeatedly stated that he expects companies to ‘start sharing’ the cost of the scheme.  As a result, the level of government grant provided through the Scheme will be slowly tapered to reflect that people will be returning to work as follows:

From August: Employers will start to pay Employer National Insurance contributions and pension contributions for furloughed workers. The government will continue to pay 80% of wages up to a cap of £2,500 per month.

From September: The government payment will cover only 70% of wages, up to a monthly cap of £2,187.50. Employers will make up the shortfall, paying 10% of wages to get furloughed employees back up to 80% of pre-lockdown levels up to a cap of £2,500.  Employers will also pay Employer National Insurance contributions and pension contributions.

From October: The government will pay 60% of wages, up to a cap of £1,875 per month. Employers will therefore pay 20% of wages plus Employer National Insurance contributions and pension contributions.

For further information, please contact Chris Riley (criley@pkf-littlejohn.com; +44 (0)20 7516 2427) or Catherine Heyes (cheyes@pkf-littlejohn.com; +44 (0)20 7516 2237).

For employment law advice, our Littlejohn Legal service can help.  In the first instance, please contact Chris Clay on cclay@pkf-littlejohn.com or +44 (0)20 7516 2266.