The Future of Furlough – 1st release of the detail

We already knew that the Coronavirus Job Retention Scheme (the Furlough Scheme) was going to be extended until October 31st 2020 and that the scheme would be made more flexible to allow employees to start working part-time for their employers whilst still being treated as on furlough for the remainder of the time. We also knew that the Government was going to reduce how much it was contributing to staff costs for those on furlough. On 29 May, Rishi Sunak provided the first release of detail about how the Furlough Scheme will change. Here are our 5 take-aways:

1. The Furlough Scheme will close to new entrants from 30 June, meaning that employees will need to have been furloughed on or before 10 June in order to have had 3 weeks away from work before 30 June. From 1 July, the scheme will only be available to employers that have previously used the scheme and only in respect of employees that they have previously furloughed.

2. Employees can return on part-time hours sooner than planned, from 1 July 2020. Employers will be responsible for paying wages, NI and pension contributions for the period that the employee is working and will not be able to claim for those costs through the Furlough Scheme. There must be a written agreement in place with each employee for the new ‘flexible furloughing’ arrangement, which can be to work any amount of time which is less than normal hours. Claims can still be submitted for the hours not worked.

3. From 1 August 2020, employers will no longer be able to recover the employer NICs and statutory minimum employer pension contribution on the salaries paid during non-working furlough. This equates to about 5% of the gross employment cost.

4. During September 2020, the Government will reduce the amount that it contributes to the salaries of those on furlough. Employers will only be able to claim for up to 70% of wages up to a cap of £2,187.50. Employers will have to cover the other 10% (and more if they have not reduced pay as part of furloughing) together with the employer NIC and employer pension contribution on the total salary. The cap of £2,187.50 will be pro-rated to the number of hours not worked. During October 2020, the maximum permitted claim will be for 60% of wages capped at £1,875 per month (pro-rated to the number of hours not worked). Employers will have to cover the other 20% (or more) of salary and the employer NIC and employer pension contribution.

5. The scheme will end on 31 October 2020.

Employers are already starting to think about their remobilisation plans and the news that ‘flexible furloughing’ (i.e. part-time working, part-time furlough) can happen from July rather than August will be welcome as employers start to scale up activities. However employers should remember that not all furloughed employees may be able/willing to return to work, even on a part-time basis (for example if they are shielding or looking after children who have not yet returned to school). Therefore it will be important to engage with furloughed staff and understand their individual circumstances. New written agreements will need to be in place with those employees who are going to come back part-time.

The tapering of the level of financial support is not as extreme as some will have anticipated, which will also be welcome to employers.

The most surprising element is the closure of the scheme to new entrants from 30 June (effectively 10 June). Only staff who have had at least 3 weeks on furlough by 30 June will be able to be furloughed after 1 July, whether fully or flexibly.

Further detail on ‘flexible furloughing’ will be published by the Government on 12 June and we will be holding a flash webinar on 15 June at 3pm – 4pm. Click here to sign-up. In the meantime, if you’ve got any questions then please contact any member of the team.


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