Furlough Scheme Phase 2: Key information for employers

What are the changes to the furlough / job retention scheme?

Another new word for the employment lawyer and HR dictionary – ‘flexible furlough’!

On Friday 29^th May 2020, the Chancellor gave details of how the furlough or job retention scheme will look as it continues through until the end of October 2020. Having reviewed the information that is currently available I view it as two phases of the scheme, phase 1 which ends on the 30^th June 2020 and phase 2 ‘the tapering or re-opening phase’ which runs from the 1^st July to 31^st October 2020.

‘Phase 2’ will take the scheme to a total of 8 months with the government subsidising wages for employers.

So, what are the key details you need to know:

10^th June 2020 – Cut off for furloughing an employee

After the 30^th June 2020 employers will not be able to furlough an employee who has not already been furloughed.

This means that an employee must have been furloughed for a minimum of 3 weeks at some point before the 30^th June 2020

Therefore, counting back from the 30^th June 2020, the latest date, an employer can furlough someone for the first time is the 10^th June 2020. Important to note if an employer is ‘rotating’ employees on furlough and/or are considering whether to furlough staff for the first time now.

Employers then have until 31‌‌ July 2020 to make a claim in respect of the period up to 30‌‌ June 2020.

June 2020 – Job retention scheme continues – ‘phase 1’

The scheme remains as it currently is, so employers can continue to furlough staff and receive 80% of their pay for the time they are furloughed. The same rules about working apply and employees are not allowed to undertake any work for their employer.

1^st July 2020 – ‘Flexible Furloughing’ begins – ‘phase 2’

Employers can continue to recover 80% of wages from the government under the scheme, in the same way as they have been doing under phase 1.

The crucial change to the scheme is that employees are permitted to return to work part-time.

Employers will have to pay for any of the hours that the employee works, and the working time cannot be recovered under the furlough claim.

If the employee does undertake any work, then the work must cover at least one week and be confirmed to the employee in writing with the employee’s agreement. The details of how this will work in practice are not yet available and we expect them to be available from the 12^th June 2020 so watch this space for more details!.

This means that when you make your claim you will need to report and claim for a minimum period of a week.

When you make your claim under the job retention scheme you will also need to provide details of the employee’s usual hours they would have been expected to work in a claim period and then the actual hours they have worked.

Deciding on and agreeing working arrangements

The number of hours and when an employee returns to work is up to the Employer to decide, there are no maximum or minimum times.

The most difficult issue for employers is going to be seeking agreement from the employee to any change in working patterns, as normal contract rules apply. This means that if an employer wants to change the hours worked, even temporarily they will need to either 1) have a clause in the contract allowing for this or 2) get agreement from the employee to the change.

Example: if an employee normally works Monday to Friday 9am – 5pm but the employer wants them to work 9am – 12 Noon this is clearly within the normal working hours so should not be an issue.

If, however the employer decides because of the business requirements or in order to ensure socially distancing, they need different patterns, i.e. 7am – 10am or 4pm to 7pm or even weekend working then they would likely need to obtain agreement from the employee to the change.

August 2020 – Employers pay National Insurance Contributions and Pension Contributions

Employers can continue to claim 80% of wages (with the cap of £2,500) for the hours that are not worked by the employee.

Hours worked by the employee will have to be paid by the employer.

Employers will now have to pay the NI and pension contributions.

September 2020 – Employers must pay 10% of wages for furloughed employees

The amount that the government will pay under the scheme will reduce to 70% of wages (with a cap of £2,187.50).

Again, this contribution is for hours which the employee does not actually undertake any work for the employer.

Employers will be required to pay NI and pension contributions and 10% of wages so as to make up the amount received by the employee to 80% (capped at £2,500).

October 2020 – Employers must pay 20% of wages or furloughed employees

The amount that the government will pay under the scheme will reduce to 60% of wages (with a cap of £1,875).

Again, this contribution is for hours which the employee does not actually undertake any work for the employer.

Employers will be required to pay NI and pension contributions and 20% of wages so as to make up the amount received by the employee to 80% (capped at £2,500).

31st October 2020 – Job retention scheme ends

Currently the scheme is set to end on the 31^st October 2020 which means that from the 1^st November 2020 employers will be responsible for paying employee wages in full in accordance with their contract terms, unless contracts are changed and/or changes are agreed with the employee.

What continues with the furlough scheme?

•  The decision whether to furlough an employee is at the discretion of the employer.

• Employees can ask to be furloughed (by the 10^th June 2020) but the decision is for the employer who can refuse.

• Employees who are shielding or have difficulties because of childcare can continue to be furloughed.

• There is no qualifying criteria for a business to access the furlough scheme and it is open to all businesses.

• Employers remain bound to pay employees what they have contractually agreed, unless agreed otherwise between employee and employer. This means that employers need to seek agreement from employees to pay anything less than 100%.

Points to note

Employers are going to be required to top up to 80% after the 1^st September 2020 when the government contribution reduces. Currently there is no requirement for employers to top up to 100% but looking at the announcement and wording of the fact sheet here, it states ‘required employer contribution’ so I expect that this will be a mandatory requirement of accessing the scheme so as to avoid employees being paid less than 80%.

The factsheet (link above) states that ‘The employer cost per month on the average grant will rise to £207 in September and to £345 in October representing 14% and 23% of gross employment cost, respectively.’

Action to take

 1.The number one thing that you need to consider is the future of your business. If you have not already done so it is crucial to think – what is my business going to look like in the next 2, 3, 4 – 6 months?

2. Do you need to start making cutbacks of staff now or planning for the near future? If so, will you need to start a collective redundancy consultation?

3. Check to see if there is there flexibility in your employment contracts? Consider are your workforce flexible and willing to change?

4. Ensure that any calculations and cash projections you have made now include the requirement to pay NI and pension contributions from the 1^st August 2020, and then factor in the employer contribution to wages for September and October.

5. Get your ‘house in order’ and prepare your claims and timing as soon as possible. From 1 July, claim periods will no longer be able to overlap months. There is effectively a ‘reset’ of the scheme from the 1^st July 2020 as it moves into what I would call phase two of the job retention scheme.

6. You will have until 31st July 2020 to make any claims in respect of the period up to 30 June 2020 thereafter you will be unable to claim for the period of ‘phase one’ of the scheme.

7. If your future planning and re-opening plans mean that it is likely you will need to bring employees back from furlough on reduced hours to start with it is important to start a dialogue with the affected employees now. Begin to prepare them for return and explain what will be required of them, where possible try to get agreement and buy-in to your plans. See my article ‘The Reluctant Returner’ about how to handle this communication.

Resources

If you would like to bring an employee back from furlough on a part-time/reduced hours basis we have produced a template letter with agreement, for you to use and you can request a free copy by sending an email to: alison@realemploymentlawadvice.co.uk please put in the subject line ‘flexible furlough return letter’.

We also have a general return from furlough letter which includes a variety of options for you and this is also available for free by sending an email to alison@realemploymentlawadvice.co.uk please put in the subject ‘return from furlough letter’ and we will email you a copy.

From the 12^th June 2020 HMRC will provide more detailed guidance for employers on how to calculate the furlough claim and how the scheme will work.

Details of the scheme which is currently available can be read here: https://www.gov.uk/guidance/check-which-employees-you-can-put-on-furlough-to-use-the-coronavirus-job-retention-scheme

Please leave a question or comments below.

This article was written by Alison Colley, Solicitor and Founder of Real Employment Law Advice.

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If you have any other questions please let me know: alison@realemploymentlawadvice.co.uk or for a free initial telephone call contact the office on 01983 897003, 023 8098 2006, 01722 653001 or 020 3470 0007.

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Other Relevant Articles for Employers

How to deal with employees who are reluctant to return to work

Frequently Asked Questions about the Furlough Scheme

Furlough / Job Retention Scheme & Parental Rights

Business reputation consideration and furlough

Furlough and Directors

Returning to work after lockdown & furlough

Key points employers should be considering during furlough

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External Resources

HMRC guidance for employers  

Step by step guide for employers to claim

How to work out the 80% to claim via the job retention scheme

Treasury Direction setting out HMRC powers to enact the job retention scheme

Government response to Covid 19

ACAS guidance on the coronavirus

Guidance in respect of apprentices and furlough

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 DIY Redundancy Documents & Process for Employers available to download for £100 plus VAT includes:

1. Redundancy plan – step by step guide
2. Timetable to use – collective consultation and non-collective consultation versions
3. Letter warning employees of redundancy situation
4. First letter to employee representatives re proposed redundancies
5. Letter to employees requesting volunteers for redundancy
6. Letter to employee representatives with details of collective consultation process
7. Ballot paper for election of employee representatives
8. Nomination form for employee representatives
9. Notice to employees with outcome of the elections
10. Notice to employees re Employee representative elections
11. Letter follow up on individual meeting
12. Letter offer of alternative employment
13. Letter to individual employees – provisional selection for redundancy
14. Letter to individual employees confirming dismissal for redundancy
15. Example Redundancy selection criteria

You can purchase the documents here: HERE

For more information or to access these offers for employers please contact us on 01983 897003 or by email: alison@realemploymentlawadvice.co.uk

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Don’t forget getting advice from a Solicitor does not have to be complicated or costly!

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