Furlough Leave: Changes to the Scheme

On 29 May 2020, the Chancellor Rishi Sunak announced further details of the changes to the Coronavirus Job Retention Scheme (the Scheme). Amongst other things, the changes will allow for ‘flexible furloughing’ and will require employers to start contributing towards the costs of the Scheme. This blog sets out the major changes and clarifications.

Cut-off date

The Scheme has been extended until 31 October 2020. However, from 30 June 2020 the Scheme will be closed to new entrants. From this date onwards, employers will only be able to furlough employees that have been furloughed for the full 3-week minimum period prior to this date. This means the final date by which an employer can furlough an employee for the first time will be 10 June 2020. Employers will have until 31 July 2020 to make any claims in respect of the period to 30 June 2020. Employers will need to take care not to be caught out by the cut-off date for furloughing additional employees and for making claims.

What is not clear is whether or not an employee who was on furlough for say, 6 weeks, during April and early May but was then brought back off furlough, can then be put ‘back’ onto furlough to take advantage of the flexible furlough arrangements (see below). The wording seems to suggest that that would be possible, but express confirmation that this is what is intended is awaited.

Flexible furloughing

From 1 July 2020, employers will be able to bring furloughed employees back to work on a part-time basis. This is a month earlier than was previously announced. Employers will be able to decide the hours and shift patterns that employees will work but must agree those with the employee and confirm that agreement in writing.

Further guidance on the flexible furlough arrangements will be published on 12 June but what is clear to date is that for anyone who is brought back part time, the employer can only claim the grant for their normal hours not worked and for worked hours, employees will be paid by their employer and employers will have to pay tax and NIC due on those worked hours paid.

Subject to the above, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance and pension contributions.

Employer contributions from August

From 1 August 2020, employers will be required to contribute towards the costs of the Scheme. In August, government contributions will remain at 80% (for hours not worked) but employers will be required to contribute the employer national insurance and pension contributions for those hours. For the average claim, this represents 5% of the gross employment costs the employer would have incurred had the employee not been furloughed.

In September 2020, government contributions will be reduced to 70% (for hours not worked)(subject to a new government contribution cap of £2,187.50) and employers will be required to contribute 10% of wages to make up the 80% up to a cap of £2,500 in addition to employer national insurance and pension contributions for those hours.

In October 2020, government contributions will be reduced to 60% (for hours not worked)(subject to a new government contribution cap of £1,875) and employers will be required to contribute 20% of wages to make up the 80% up to a cap of £2,500 in addition to employer national insurance and pension contributions for those hours.

The Scheme will close from the end of October.

Self-Employment Income Support Scheme

Those eligible under the Self-Employment Income Support Scheme will be able to claim a second and final grant in August 2020. The grant will be worth 70% of their average monthly trading profits, paid out in a single instalment covering 3 months’ profits, and capped at £6,570 in total. An individual does not need to have claimed the first grant in order to be eligible for the second and final grant.

The Furlough Advice & Support Team at Edwin Coe will continue to monitor and report on the situation as it develops.

To review our previous Covid-19 updates, please click here.

Please note that this blog is provided for general information only. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content of this blog.

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