The Furlough Scheme is changing

From 1 July 2020, employers can bring employees back to work part-time but still claim through the Coronavirus Job Retention Scheme (CJRS) for their normal hours that they are not working.

For the hours that employees work, they will be entitled to 100% of their wages which will be covered by the employer. The CJRS will contribute towards the hours not worked.

Where employees are moving onto flexible furlough, employers must ensure new written furlough agreements are in place for them.

Furlough closed to new entrants

The CJRS scheme will be closed to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that have been furloughed for a full 3 week period prior to 30 June.

This means that to be eligible, employees must be furloughed by 10 June. If an employee is furloughed by 10th June and remains furloughed for at least 3 weeks, an employer can subsequently re-furlough that employee.

Employer contribution to furlough pay

Until August 2020 furlough pay remains capped at 80% of salary up to £2500 and both Employers National Insurance contributions (NICs) and employer pension contributions can be recovered through the scheme. 

From August 2020, the furlough claim will gradually reduce as employers will be required to pay NICs and pension contributions themselves.

From September 2020, employers will only be able to claim 70% of wages through the CJRS however employees will still be entitled to receive 80% of their wages. This means that employers will have to pay 10% themselves. This will increase to 20% in October (with the scheme paying 60%).

What should employers do now?

If you intend furloughing an employee who has not already been furloughed, then this means some quick and careful planning must happen now before 10th June. We recommend that employers:

• Review their staff requirements for the period between now and the end of October to consider which furloughed staff can be brought back part-time and which cannot;

• Consider which employees might need to be furloughed by 10 June in order to be eligible for the new CJRS;

• Ensure updated furlough agreements are in place for all employees being brought back part-time working under the CJRS;

• Consider other measures to reduce staff costs, such as redundancies or reductions to salaries

Increased complexity of furlough claims

Both furlough claims and payroll calculations for August through to October will become more complex and take significantly longer to administer.

Wages will need to be worked out based on part-time hours which is not as simple as it sounds as your payroll software will work this out based on the number of working days in a month but the furlough claim will work it out based on the number of calendar days in the month.

Furlough claims will also need to include the number of normal hours worked for each employee versus the hours actually worked.

Financial Planning

Before these changes come into effect, we recommend that employers who are, and who expect to continue to use the CJRS, should model the impact for their businesses to assess what impact this will have on their finances. It is likely that some employers will consider making redundancies at this time so as to avoid the increased costs of retaining staff on furlough.

More information on flexible furloughing and how to calculate claims will be published on 12 June when we will be able to give more detailed guidance as to how the new CJRS will work.