New ‘Flexible’ Furlough Guidance
Since our last newsletter, much has changed in relation to covid-19 and the associated business guidance – particularly on the government furlough scheme.
On 12 June, HM Revenue & Customs released its guidance on a new ‘flexible’ furlough scheme. Unfortunately, this guidance is found not in one place, but rather across existing guidance on the Coronavirus Job Retention Scheme (CJRS); in new guidance – and a government overview helpfully summarising the latest changes. The sum total has been described as ‘horrible and complex’.
The CJRS closes on 31 October 2020
What’s changing?
On 1 July, businesses can bring their furloughed staff back to work (for any amount of time) and clam the CJRS grant for hours not worked. But only firms that have previously claimed CJRS grants will be able to claim more grants. In other words, employees must have previously been placed on furlough for at least three consecutive weeks. Note that employers will need to be aware that the minimum claim period allowed is seven calendar days.
From 1 July, flexible furlough agreements can last any amount of time as agreed between worker and business up until the end of the CJRS. Employees can enter into a flexible furlough agreement more than once but it must be agreed in writing with the employee.
On 1 August, the level of government grant will decrease each month and employers will be expected to contribute more. So:
· For August, government will pay 80% of wages up to a cap of £2,500 for the hours an employee is on furlough, and employers will pay ER NICs and pension contributions for the hours the employee is on furlough.
· For September, the government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time spent on furlough.
· For October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee is on furlough. Employers will pay ER NICs and pension contributions and top up employees’ wages to ensure they receive 80% of their wages up to a cap of £2,500, for time they are furloughed.
Wage caps are proportional to the hours not worked in each case.
There will also be a cap on the number of CJRS claims an employer can make after 1 July. This means employees will be subject to a maximum of the number of claims they made at any one time between March and June.
What about those employees returning from statutory parental or maternal, etc leave? The guidance allows these employees returning to the workplace after 10 June to be furloughed even if they have not been furloughed previously. But this is subject to the employer making a CJRS claim for any other employees furloughed for at least three consecutive weeks to 30 June. There are further eligibility requirements too, which should be checked with specialist advisers.
There are also provisions in the new furlough guidance specifically in relation to shielding or sick employees or those who are carers. So, for example, if an employee who gets ill with covid-19 while on furlough, the employer can then decide whether to place them onto statutory sick pay or keep them furloughed on furlough pay.
Note that employers must keep a copy of all records for 6 years.
If you would like us to cover an issue in the next NGM Tax Law Newsletter, we would be pleased to hear from you