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Changes Made to Government Flexible Furlough Scheme Rules

On 1st July 2020, the government’s ‘flexible furlough scheme’ officially started. For many who have been trying to keep up with the various iterations of the Coronavirus Job Retention Scheme (CJRS) since its introduction, there is likely to be considerable confusion over this new version of the scheme. In this article, we will explain the changes introduced in this new extension to the Coronavirus Job Retention Scheme (JRS), how these will work, and the real-world implications.

What is the government’s flexible furlough scheme?

The latest variant of the JRS is designed to allow employers to continue furloughing employees on a full or part-time basis, while they remain furloughed for the remainder of their contracted hours. This means that the hours being worked will be paid by the employer in full, but the furloughed hours will be covered jointly by the scheme and the employer. While this seems fairly simple in principle, the practicalities and nuances of the scheme will be inevitably more complex. The main features of flexible JRS are as follows:

  • from 1st July 2020, employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked
  • the flexible JRS will only be available for employees who were already registered on the scheme before 1st July 2020, i.e. the scheme will close to all new applicants unless they are returning from statutory parental leave
  • Employees must have previously been furloughed for at least three consecutive weeks between 1st March and 30th June 2020. This means that the last day an employee could have started furlough for the first time was 10th June
  • it will still be possible to furlough a member of staff for their full contracted hours
  • As of 1st July, furlough periods can last any amount of time, i.e. there is no set minimum period (the minimum prior to this date was three weeks).
  • Any furlough periods which include days in June and July must be split into separate claims
  • the new flexible furlough scheme rules mean that an employer cannot claim for more employees than they did in the period before 1st July 2020, except if anyone has returned from statutory parental leave. As such, it will be important for employers to keep a close eye on how many people they are claiming for.

How will the amount of the JRS grant change?

From 1st August 2020, the amount of the JRS grant will reduce each month, which will effectively gradually wean employers from reliance on the scheme and, hence, reduce the burden on the public. At this point, the government will fund 80 percent of wages up to £2,500 for the hours an employee is on furlough, but employers must then pay any national insurance (NICs) and pension contributions (previously under the scheme, pensions and NICs were paid for by the government.

From 1st September 2020, the government’s contribution to furloughed hours will drop from 80 percent to 70 percent, and the cap will drop correspondingly from £2,500 to £2,187.50. In addition to paying for NICs and pension contributions, employers will also need to make sure that employees receive 80 percent of their wages up to a maximum of £2,500 while they are furloughed; this means employers will pay a contribution of up to £312.50.

And from 1st October 2020, there is a further reduction with the government paying 60 percent of wages up to a maximum of £1,875 for furloughed hours. Employers will continue to pay NICs and pension contributions and top up employees’ wages to 80 percent of their wages (capped at £2,500) while they are furloughed (which equates to an employer contribution of up to £625).

Calculating how much can be claimed

The full rules for calculating how much can be claimed can be found on the government website here, and the JRS calculator can be found here. The key points to bear in mind when working out how much can be claimed are as follows:

  • Under the flexible JRS scheme, the claim amount is determined by the ‘usual’ hours worked when the employee is not furloughed, less the hours they actually work.
  • Employers will need to keep a record for six years of any amount claimed, the claim period for each employee, claim reference number, usual hours worked including any calculations, and the actual hours worked for employees flexibly furloughed
  • If a staff member has fixed hours, their usual hours are based on their contracted hours up to 19th March 2020.
  • If a staff member has variable hours, their ‘usual hours’ are worked out by using the higher of the average number of hours worked in the tax year 2019 to 2020, or the corresponding calendar period in the tax year 2019 to 2020 (including periods of paid annual leave or non-discretionary overtime).
  • As the government’s guidance states, if an employee is fully furloughed, there is no need to calculate usual hours and furloughed hours – the amount to be paid is simply based on the maximum wage amount (currently £2,500).

Final words

There is no doubt that the new flexible JRS is more complex than it was previously, but this is an inevitable consequence of adding flexibility. The government is clearly very keen to keep as many people in employment as possible, even if this means on a part-time furloughed basis. It is recommended that all employers keep a full complement of records from the start of their use of the JRS until the day it is no longer used. This will mean that any potential questions or enquiries from HMRC can be quickly responded to. As ever, when it comes to tax and the law, it pays to be extremely cautious and diligent. For more in-depth insights on the revised JRS, talk to experienced immigration solicitors.

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