While this has been framed as an extension to the current scheme, I would caution that the scheme conditions have been overhauled to such an extent that in practice the revisions make this a different scheme. The changes being introduced from 1 July cover the conditions for an entitlement to make a claim, the amount of the grant available and how the grant will be calculated. The changes will apply regardless of whether the employee will be on ‘full’ or ‘flexible’ furlough.
Before commenting on the changes to the scheme, it is important to note that those looking to make a claim under the existing scheme (which comes to an end on 30 June) will need to make their claim by the 31 July at the latest.
What is clear from the latest guidance is that employers wishing to make a claim under the new scheme will not only have to contribute towards the costs of their employees remuneration to qualify, but that there will be a financial and time cost to the employer in calculating and submitting a claim under the revised scheme which will be significantly more than a claim under the current scheme.
Employers will want to understand the full scope of the changes to the scheme before deciding whether a claim is right for them, and whether including employees on the scheme will be the best option to support the business. It will be key to start with what work the business needs employees to do and consider all the options for achieving this, rather than engineering the workforce planning to try and fit within the scheme.
Steve and I presented a webinar to discuss the upcoming changes in detail. We used examples to talk through the detail and practicalities employers need to be thinking about before putting staff on flexible furlough and making a claim under the revised scheme. To view a recording of the webinar, and to download the detailed notes, please click here.
Welcome flexibility introduced
Central to the changes is the ability to ‘flexibly furlough’ employees from 1 July, which will in essence allow employers to bring employees back to work on a part time basis, dependent on business need. For the remainder of the employee’s usual working time not spent at work, they can continue to be furloughed and the employer can claim a grant towards the cost of furlough.
To take advantage of the added flexibility, the new scheme requires the employer to issue a new ‘flexible furloughing’ arrangement letter to the employees and keep track of hours worked and hours of furlough.
Introduction of a minimum level of pay to be paid to employees on furlough
Currently, the scheme allows employers to decide how much they pay their employees, but caps their claim to the lower of the amount paid to the employee, £2,500 per month and 80% of their 2019/20 equivalent monthly earnings. In another step change, from 1 July employers are required to ensure the employee receives ‘minimum furlough pay’ for the hours furloughed. If the employee doesn’t receive minimum furlough pay, no claim can be made. Employers will need to ensure they accurately calculate minimum furlough pay to ensure their claim is not retrospectively denied.
To say the calculation of minimum furlough pay is complicated would be an understatement. The guidance talks through the calculation at length, and with examples, but I anticipate this will still cause employers and advisors alike significant problems to get right.
Usual hours as the basis of determining claim available
The calculation of minimum furlough pay also introduces the concept of ‘usual hours’, which needs to first be determined before the calculation of minimum furlough pay can be undertaken. Usual hours is loosely based on the methods of determining qualifying fixed and variable pay under the current scheme calculations, and will be used to determine the amount of claim available. However, this is again likely to be difficult to get right. As with the current scheme, there are different methods to determine usual hours depending on the type of work undertaken by the employee. Each type of work has its own calculation to arrive at usual hours, with the work types being:
- Employees with fixed hours
- Employees with varying hours – this work type has two standalone calculations which are both required to be undertaken
- Piece or task rate workers – identified using the NMW interpretation of a piece rate worker
Amount of support available under the scheme
Until 31 July, the amount of the grant available will continue to be 80% of wages capped at £2,500 along with support with pension and employer national insurance costs. From 1 August, no relief for employer national insurance or pension contributions will be available.
From 1 September, the scheme will require employers to contribute towards the employees furlough pay. For furlough hours during September, the employer will cover the costs of an eighth of the furlough pay and rising to a quarter of the furlough pay costs for October.
Scheme closed to new entrants
As previously announced by the government, employees who haven’t had a qualifying 3 week period of furlough by 30 June, will not be able to benefit from the revised scheme.
One exemption to this restriction is for those currently on statutory parental leave, who return to work after 30 June meaning the employer has not had an opportunity to furlough them for a 3 week period prior to 30 June.
We are currently working through the real detail of the guidance and will be posting an in-depth review early next week. We also hope that you will be able to join us on Thursday for the webinar.