COVID-19: Flexible Furlough scheme starting on July 1

Introduction

Hello, my name’s Paul Griffin and I’m Head of the Norton Rose Fulbright Employment Team in London. We’ve covered the UK Coronavirus Job Retention Scheme before, but in this week’s video, I’m going to look at the important changes to the furlough scheme which come into effect on 1 July.

While much of the scheme remains the same from 1 July, employees will be able to return to work for their employer on a part-time basis and the employer will still be able to claim under the scheme in respect of the time where employees are not working and placed on furlough. This flexibility allows companies to return gradually to normal operations where possible, while recognising that this may mean operating in the short-term with less staff.  

What restrictions are there to using the scheme?

From 1 July, 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. However, an employer can only claim a grant under the scheme after 1 July in respect of employees that it has already successfully claimed for. This means the employee must have been furloughed for at least three consecutive weeks taking place any time between 1 March and 30 June 2020, although there is an exception for employees who are returning from statutory family leave or a military reservist returning to the workplace after a period of mobilisation after 10 June. So, the number of employees that the employer can claim for in any single claim period starting from 1 July cannot exceed the maximum number of employees that an employer has previously claimed for. This causes some difficulties if there is a transfer of employees under a TUPE transfer. The new employer needs to know the number of employees who have previously been furloughed by the transferor and also confirmation that they had successfully been furloughed by 10 June. This needs to be asked in any due diligence exercise.  

Before 1 July, an employee must be furloughed for a minimum period of three weeks for the employer to make a successful claim. From 1 July, this minimum period will cease to apply and agreed flexible furlough agreements can last any amount of time. Employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim under the scheme the grant for the hours not worked. This means that an employer could agree for an employee to work half days for five days a week or work one week on, one week off – the scheme allows flexibility to fit in with the employer’s needs.

The amended guidance makes it clear that when agreeing to flexibly furlough employees, the employer will need to agree this with the employee (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement. This is important to ensure that both parties are aware of changes to working hours and any other changes to terms.

How can an employer make a claim?

Although the period of the flexible furlough arrangement can last any amount of time, unless otherwise specified the employer must make a claim in respect of a minimum period of seven calendar days.

From 1 July, a claim period cannot cross into different months. So, if an employee is furloughed in June and continues to be furloughed in July, separate claims will need to be made to cover the period up to 30 June and the period commencing 1 July. The employer will have until 31 July to make a claim for the period up until 30 June.

Payments to the employer will be made six working days after the claim has been made and so this needs to be taken into account if the employer is making the claim prior to running the payroll. The claim can still be made up to 14 days before the claim period ends.

When making the claim, in addition to the information currently required, the employer will also need to provide details of the number of usual hours the employee would work in the claim period and the number of hours the employee has or will work. The employer will need to put in place a record keeping process to capture the hours worked and the number of furloughed hours for each employee.

As before, an employer can only make one claim for any period. However, there are also new provisions for what an employer should do if they have made a mistake with regard to the claim. If an employer claims in advance and in fact, the employee works for more hours than the employer has claimed, some of the grant claimed for furloughed hours will need to be paid back to HMRC. HMRC are allowing employers to tell them about an overclaimed amount as part of the next claim and the amount claimed in that period will be adjusted to take account of the previous error. Where an employer is not making any further claims then HMRC are working on a process that allows the amounts to be paid back.

If the employer has made an error that has resulted in an underclaimed amount, then the employer should contact HMRC to amend the claim. HMRC will need to conduct additional checks as the employer is increasing the amount of the claim.

The existing guidance has been updated to reflect these changes and additional guidance notes and examples have also been published. All of these can be found on the Government website and I  would recommend you review them, particularly the worked example on how to calculate the amount to be claimed for non-working hours.

As ever if you would like any more information on this then please contact me or one of the team at Norton Rose Fulbright. Please continue to stay safe and well. Thank you