Q&A: Changes to Coronavirus Job Retention Scheme
On 12 June, the government released new guidance together with a useful summary; providing further detail on how the Coronavirus Job Retention Scheme will change from 1 July.
In short, the changes to the scheme provide flexibility to employers; by allowing them to bring employees back to work on a part-time basis whilst still obtaining the grant from the government for hours not worked. The changes also detail the contribution that employers are required to make from 1 August.
The new rules on claim periods and calculating a flexible furloughed employee’s pay are complex so we advise all employers to review the below and the relevant government guidance carefully in good time before the commencement of the new scheme on 1 July.
Unfortunately, the numerous government publications and information on the new scheme is not located in one place. However, to make things easier, we have provided links to the most important publications throughout this article.
Who is eligible for the new scheme?
Employees must have been furloughed for a full three-week period prior to 30 June to be eligible for the scheme. This means that the final date by which an employer needed to agree in writing with an employee to place them on furlough (for the first time) was 10 June.
Please note that there may exceptions to this when parents are returning to work following statutory parental leave, as there is greater flexibility for this category.
The government guidance provides further detail on who is eligible for the scheme.
Employers will have until 31 July to make any claims under the original scheme (during the period up to 30 June).
How can the scheme be used flexibly?
From 1 July, employers can bring employees back to work that have previously been furloughed on a part-time basis. This can be for any amount of time and any shift pattern, and although employers will be responsible for paying employees’ wages whilst they are in work, employers can still claim under the scheme for hours not worked. As before, during furloughed hours, employees are not able to carry out any work for their employer.
When claiming the grant for furloughed hours, employers will need to report and claim for a minimum period of seven days (unless they are claiming for the first few or last few days in a calendar month). Claim periods cannot overlap and must include all furloughed and flexibly furloughed employees, even if they are paid or put on furlough at different times. There are examples of how this works in practice in the government guidance.
You should only put in a claim when you have certainty on the number of hours an employee will work during the period. Therefore, it may be better if you decide on this at the beginning of the period of work.
Until 1 July, the minimum length of time an employee can be furloughed is three weeks. This means that even if a furlough period started on 22 June for example, an employer would need to wait a minimum period of three weeks until at least 13 July before taking the employee off furlough or implementing a flexible furlough arrangement. From 1 July, however, there is no minimum period of furlough.
When can employers submit claims under the scheme?
As mentioned above, under the original scheme, all claims must be submitted by 31 July.
Under the new flexible scheme, employers are able to submit claims from 1 July for days in July. Importantly, under the new guidance, employers are unable to submit claims that cross calendar months. This means that if an employee is rotated on and off furlough and their period of furlough, say, spanning across weeks in August and in September, employers will need to make separate claims for August and September respectively.
Are there any limitations to the scheme?
The government has put in place limits on the number of employees that can be claimed for in a single claim period. Employers cannot claim in a single claim period for more employees than the maximum number of employees they furloughed under the previous scheme under any claim.
For example, if an employer had previously submitted two claims up until 30 June 2020, claiming for 50 and 100 employees, the maximum number of employees that the employer could furlough in a single claim under the new rules would be 100.
This may cause issues for employers who have put rotating furlough patterns in place. For example, if an employer has divided its workforce into groups and rotated them on three-weekly furlough periods under the old scheme, they will not be able to flexibly furlough the entire workforce so that each staff member works part time. If this is the case, employers will need to continue rotating their staff on and off furlough, which will mean that in a single claim period, employers will not be claiming more than the maximum amount they furloughed in a single incident under the original scheme.
Please note that this cap may not apply to employees returning from statutory parental leave.
What do employers need to contribute?
From 1 August, the level of grant provided by the government will be slowly reduced. Grants will not be available for Class 1 employer NICs or pension contributions and employers must cover such costs.
From 1 September, an employer must contribute 10 per cent to employees’ wages whilst on furlough and from 1 October, must contribute 20 per cent. It is important that whilst on furlough, an employee still receives 80 per cent of their wages, up to the cap of £2,500 per calendar month. As before, employers are able to top up the wages an employee receives whilst on furlough. This can either be to the original salary limit or 80 or 90 per cent.
How do you work out pay under the new scheme?
The government has published guidance on the steps an employer must take before calculating a claim.
If an employee is fully furloughed, employers need to work out the maximum wage amount, which will depend on month in which the claim period is located. There are examples of how this is calculated in the guidance.
If employees are returning part time, employers will need to work out how much they will need to pay by reviewing an employee’s usual hours and recording an employee’s worked hours and furloughed hours. For those employees working fixed hours, their usual hours will be calculated based on their contracted hours as at the end of the last pay period ending on or before 19 March 2020.
HMRC has created a calculator which works out what employers can claim, both under the original scheme up to 30 June and new flexible scheme up to 31 July. Please note that this calculator cannot be used in all circumstances, such as if employees receive employer pension contributions outside an auto-enrolment pension scheme of they have an annual pay period. If an employee is being flexibly furloughed, employers must work out their usual hours before using the calculator. The government has also published guidance detailing how much an employer can claim under the scheme.
What happens with employees whose pay varies?
If an employee is not contracted to a fixed number of hours or their pay depends on the number of hours they work, their usual hours will be the higher of:
- The average number of hours worked in the tax year 2019-2020; and
- The corresponding calendar period in the tax year 2019-2020.
Employers need to calculate the usual hours for each pay period, or part-pay period that falls within the claim period.
There are worked examples of this provided in the government guidance.
How do employers flexibly furlough employees in practice?
The guidance confirms that employers need a new written agreement to confirm the new furlough arrangement. This can be an email as long as consent is obtained.
It is not clear if employers will need to obtain a new written agreement each time the furlough pattern is changed, for example in response to increased numbers of staff required in response to higher footfall in stores. Until this is clarified, we would advise obtaining written agreement if any changes are made, since any change would arguably amount to a variation in terms.
Do employers need to keep any records?
Employers must keep the following for six years:
- The amount claimed and claim period for each employee;
- The claim reference number for their records;
- Their calculations in case HMRC need more information about their claim;
- Usual hours worked, including any calculations that were required, for employees flexibly furloughed; and
- Actual hours worked for employees they flexibly furloughed.
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