The New Way to “furlough”

Friday, HMRC released the Guidance for the new flexible furlough scheme, unfortunately this was by way of updating the previous guidance and introducing 3 new pieces of guidance, which is simply quite difficult to navigate. Probably where the acronym for the scheme came from!

However, here goes:

From 1st July, the new FFS Scheme will come into effective for employees already furloughed. The scheme enables employees to return to work at times, and hours agreed between the parties, and employers can still claim the grant for the employee’s normal hours not worked.  

Timetable

The scheme will see tapered contributions from employers as the Government’s contributions are reduced as follows:

Until 31st July 2020 employers can still claim for 80% of the employee’s regular salary, or up to £2,500, whichever is lower, as well as employer National Insurance Contributions and pension contributions. These figures will only apply to the hours the employee doesn’t work. Employers will be liable to pay the employee their full contractual entitlement for the hours they have worked. 

From 1st August 2020, employers will have to pay employee's National Insurance Contributions and pension contributions and will no longer be able to claim a grant for these. The contribution of NICs and pension will apply to both the hours not worked and hours worked. Until 31st August 2020, the Government will pay 80% of employee’s regular wages up to a cap of £2,500 for hours not worked. Employers will be liable to pay the employee in their full contractual entitlement for the hours they have worked. 

From 1st to 30th September 2020 the Government will then pay 70% of employee’s regular wages up to a cap of £2,187.50 for the hours not worked. Employers will then be required pay 10% of those wages to make up the shortfall to 80%, up to a cap of £2,500, plus employers' NICs and pension contributions, as well as the hours worked.

From 1st October 2020 until the end of the scheme which will end on 31st October 2020, the Government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will responsible to pay 20% of wages to make up the 80% total, up to a cap of £2,500 plus employers’ total NICs and pension contributions, and again for the hours the employee works.

Eligibility to claim

An employer can claim for any employees they have furloughed if they have:

• furloughed that employee for at least 3 consecutive weeks between 1 March and 30 June 2020

• a UK PAYE scheme started on or before 19 March 2020

• enrolled for PAYE online

• submitted a report under the Real Time Information (RTI) reporting system for that employee on or before 19 March 2020

• a UK bank account

Employers can only claim for furloughed employees that were employed on 19 March 2020 and who were on their PAYE payroll on or before 19 March 2020. This appears unchanged from the previous guidance.

From 1 July, only employees previously claimed for under the previous Coronavirus Job Retention Scheme grant for will be eligible for further grants under the scheme. This means they must have previously been furloughed for at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June 2020. The last day an employee could have started furlough for the first time was 10 June 2020 (this does not apply to those returning from family related leave - see blog here).

The guidance further states that where an employee has previously been furloughed for 3 weeks at any time between the implementation in March and 30th June 2020, at any time, then they are entitled to be flexible furloughed under the scheme. 

Further, if you had made any staff redundant as a result of the coronavirus but re-employed them then they too are eligible to furloughed so long as this was done by 10th June 2020.

The guidance can be accessed here.

Which employees can be furloughed?

To be eligible for the funding a Furloughed employee the above eligibility must be satisfied, and can be on any type of contract, including:

· full-time employees

· part-time employees

· employees on agency contracts

· employees on flexible or zero-hour contracts

This element of the guidance appears to be unchanged and can be accessed here.

Agreement to furlough

There must still be an agreement to furlough between employer and employee, as with the previous scheme.

The employers must:

• make sure that the agreement is consistent with employment, equality and discrimination laws

• keep a written record of the agreement for five years

• keep records of how many hours your employees work and the number of hours they are furloughed (i.e. not working)

It is clear from this that employers need to think about how the furlough arrangements, whether that be flexible or otherwise, will impact on those with protected characteristics such as parents, pregnant women and those with disabilities.

Calculating claim period

I will start by saying this part of the guidance was difficult to follow and I did have to read this a couple of times. The abbreviation of the scheme is living up to its name. However, I have summarised what I believe are the most important parts below.

Your claim period is made up of the days you are claiming a grant for. The start date of your first claim period is the date your first employee was furloughed. You can backdate your claim to 1 March 2020 where employees have already been furloughed from that date.

Claims under the old scheme i.e up to 30th June 2020 must be made by 31 July 2020. This is even the case if the employee will continue to be furloughed.

Claim periods under the new scheme i.e. from 1st July onwards must start and end within the same calendar month, and must last at least 7 days unless you’re claiming for the first few days or the last few days in a month.

Employers are advised to match the claim period to the date their payroll is processed, if they can. You can only make one claim for any period so you must include all your furloughed or flexibly furloughed employees in one claim even where they may be paid at different times. There is no minimum three-week period for the furlough scheme this has been removed from claims after 1 July 2020.  So, you can submit claims on a weekly basis if you so wish, or a monthly basis, and this must be in respect of all employees furloughed.  

Where employees have been furloughed or flexibly furloughed continuously (or both), the claim periods must follow on from each other with no gaps in between the dates. This appears to suggest that any break in the claims process will affect eligibility to continue, this should be considered when choosing your claim period. 

When claiming for employees who are flexibly furloughed employers are advised not claim until they are sure of the exact number of hours, they will have worked during the claim period. If employees work more hours than submitted the employer must reimburse HMRC the overpayment. 

Employers must keep a record of the new agreement of varied hours and a record of all hours worked for 5 years pursuant to the scheme.

Calculating employees’ hours in the claim period

Fixed Hours calculation can be found here

Variable hours calculation can be found here

Flexible furlough example can be found here

Examples of each type of claim can be found here

It would be advisable for anyone struggling with these calculations to speak to an account to check that calculations are accurate, or for guidance on doing so.

Making a claim

The Guidance on how to make a claim can be found here

The Guidance on whether employees’ wages need to be reported on PAYE RTI can be found here

Finally, a  summary of the changes can be found here