'New' flexible furlough and phase out

 As the furlough scheme changes shape again this week, HR and in-house legal must get to grips with the scheme's new flexibilities and gradual phase-out. We look at key questions and answers on the 'new' Coronavirus Job Retention Scheme (CJRS)

What are the latest developments?

On 12 May 2020 it was announced that the CJRS would be extended until the end of October 2020 but the scheme will look very different from July.

Headline changes are as follows.

• No change until the end of June 2020.
• From 1 July 2020 furloughed employees will be able to work on a part-time basis (one month sooner than previously envisaged). 
• Employers will pay employees in full for days worked, as normal under employees’ contracts of employment. Employers can claim under the CJRS for days not worked, subject to the relevant caps.
• From 1 August 2020, employers will be required to pay employer national insurance contributions (NICs) and employer pension contributions for furloughed employees.
• From 1 September 2020, employers will be required to pay 10% of employees’ 80% furlough pay. Recoverable furlough pay will be capped at £2,187.50.
• From 1 October 2020, employers will be required to pay 20% of employees’ 80% furlough pay. Recoverable furlough pay will be capped at £1,875.

When does flexible furlough start? 

From 1 July 2020 employers can bring back to work employees that have been previously furloughed for a full 3-week period prior to 30 June 2020.

Do employers and employees have to follow a set pattern of work?

No. The exact working pattern can be agreed between an employer and an employee and it seems that there will be no minimum/maximum requirement to continue qualifying for the scheme. 

Is flexible furlough compulsory?

No. Employers are not required to bring back employees part-time. Employers can keep staff at home, not working at all, if they wish. These employers will continue to benefit from the scheme but will need to begin to make contributions to furlough pay for days not worked, as highlighted above.

What is the last day that employees can be placed on furlough?

The cut-off date is 30 June 2020. Employees must have been on furlough for 3 weeks prior to this date. This means that the latest date an employee can be placed on furlough for the first time is 10 June 2020. Pay for employees who are placed on furlough after this date will not qualify for any grant under the CJRS. 
If employees have previously been placed on and off furlough for three week periods (under a ‘rotating furlough’ arrangement), our understanding is that they can be placed on furlough again after 10 June 2020. But employees cannot be placed on furlough for the first time after 10 June 2020, as they will not have completed the required minimum three week period. 

How will employees be paid?

The amount that employees are entitled to be paid for days/hours worked will be as per their contract. Employers will be responsible for paying NICs and tax on these amounts. It seems that employers who have implemented a pay cut across the board for employees who were not furloughed, may also be able to agree a variation to the contract of furloughed employees so that their part-time rate is reduced accordingly. As with any variation, an employee will have to agree to the change but this is likely to be accepted if the alternative is redundancy. 

Do we need to enter into new agreements?

Furlough agreements under the original CJRS should state that employees are not permitted to carry out any work for their employer whilst on furlough.  Employers will therefore need to reach new agreements with employees if bringing employees back to work part-time. 
Written agreements for flexible furlough arrangements, incorporated into employees’ contracts, are not strictly necessary. However, this is best practice and strongly recommended. As a bare minimum, verbal agreements must be reached with employees and these must be recorded in writing. 

What will the cost be for employers?

As highlighted above, the latest announcement made it clear that the CJRS cannot last forever and from 1 August some of the costs will revert back to employers. This will be a gradual shift, starting with the requirement to pay NICs and pension contributions, then 10% from September, and by October paying 20% of furlough pay.

The scheme will close on 31 October 2020. 

Next steps and further guidance

The government published a fact sheet on the new scheme, which can be found here.

The government guidance for employees and employers have also been updated, but currently both only highlight the key points.

An important date for your diary is 12 June 2020 – this is when detailed guidance on the operation of the new scheme will be published. 

Until then, employers should enter into a dialogue with employees about returning to work part-time. Any agreement should be documented and employers should be mindful that there may be further requirements, once the full guidance is published.

We will keep you updated via our email Briefings and our dedicated employment law Twitter feed: @TLT_Employment 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2020. Specific advice should be sought for specific cases. For more information see our terms & conditions.