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Flexible Furlough

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Due to the ongoing COVID-19 pandemic, many businesses remain unable to operate at all. Others are starting to operate, albeit on a reduced basis.

From 1 July 2020, the Coronavirus Job Retention Scheme (CJRS) has been modified so that employers can start to bring back employees who previously were furloughed. Those staff can work on a part-time basis within the furlough scheme, so that the pay for their furloughed hours can still be reclaimed from the Government under the CJRS – this is called "flexible furlough".

How long will furlough/flexible furlough be available to businesses?

The CJRS has been extended so that furlough/flexible furlough is available until 31 October 2020 (subject to any further extension of the scheme by the Government).

How will flexible furlough work?

An employee will work some of their normal hours but be furloughed for the remainder of those normal hours.

The employee can be brought back to work for any amount of time, and on any shift pattern, subject to these new temporary arrangements being agreed. The employer will then be able to claim a CJRS grant for the normal hours not worked by that employee each week.  Please note that the previous 3 week requirement no longer applies.

During furloughed hours, employees will be subject to the continuing requirement that the employer shall be under no obligation to provide any work to them, and they must agree not to attend their usual workplace or provide any services or generate any revenue for their employer or for any organisation linked or associated with the employer.

If a previously full-time employee is asked to come back to work part-time - say, Monday, Wednesday and Friday, then on the other days that employee remains furloughed - the employee must not be asked or encouraged by the employer to work from home on the furloughed days, even if just to prepare something for their next working day – to do so will potentially invalidate eligibility for the scheme and will justify a refusal by HMRC to pay the grant, or may allow HMRC to recover any grant paid when the business is subsequently audited.

Eligibility for furlough/flexible furlough

There are some strict eligibility rules that apply:

  • The option is only available to employees who were furloughed on or before 10 June 2020, with the exception of employees who are returning to work following a long period of statutory family leave (e.g. maternity leave, shared parental leave etc), or a period of mobilisation as a military reservist. Anyone coming back to work after long-term sickness does not fall into the exceptions so cannot be furloughed.
  • The business cannot have more employees on full or flexible furlough than the number they claimed for before 10 June 2020. This means that if a business of, say, 10 employees had no more than 5 employees on furlough at any one time as at 10 June 2020 (say, on a rolling 3 week on/ 3 week off basis), they cannot have more than 5 employees on full or flexible furlough from 1 July 2020.

What happens with furlough agreements?

There have been lots of changes with the CJRS over the past few months. Employers should ensure that their employee contractual documentation is up to date.

If employees who were on full furlough as at 30 June 2020 stay on full furlough from 1 July 2020, the previous furlough agreement will probably still apply without any changes required.

For employees being taken off full furlough to come back to work full-time, either their pre-furlough contractual terms will need to be reinstated in full or they may be reinstated subject to some amendments (e.g. if an across-the-board temporary pay reduction is being imposed).

For employees who are on flexible furlough, a carefully worded new furlough agreement will need to be provided and agreed. In some circumstances, consultation with workplace representatives will be required. Businesses may need very flexible terms incorporating into the flexible furlough agreement to take into account the likelihood of there being unforeseeable fluctuations in work demand. It is not beyond the realms of possibility that an employee will be at work full-time in one week, not required at all the next week, required for a few hours each day the following week, then required for completely different hours on different days the next week!

Financial calculations

For most employees, during the flexible furlough period their furlough pay will be 80% of their normal pay (calculated as at 19 March 2020), subject to the monthly cap imposed by the CJRS. That sum will be adjusted to reflect the proportion of their usual working hours that they are furloughed. So, if an employee normally works 5 days per week, 7 hours per day, their normal hours are 35 per week. If they are brought back to work 3 days per week, they receive normal pay for those 3 days worked (21 hours), and furlough pay for 2 days on furlough leave (14 hours).

Some employers have topped up their furloughed employees’ wages so that the employees have been receiving 80% of actual pay, or in some instances even 100% of pay whilst furloughed. That may or may not continue to be the case going forward, particularly as employers will be required from 1 August 2020 to start contributing to the furlough pay costs (with their contributions increasing in September; increasing again in October). If things do change, remember to issue a revised furlough agreement to affected employees and get the terms agreed.

If employees are opted in to automatic pension enrolment, the minimum employer pension contributions will be paid in the normal way during the flexible furlough period, calculated with reference to furlough pay in respect of furloughed hours, and with reference to normal pay for hours worked.

Of course, computerised payroll systems were not designed to calculate furloughed and/or flexible furloughed and/or non-furloughed hours! Accountants/HR/payroll administrators are inevitably going to have a tough few months ahead calculating irregular wage and pension contribution figures that may change for every employee every week until the end of October. Factor in holiday pay and notice pay and you can hear the payroll department weeping! Mistakes will be made occasionally, but sensible discussions should mean those errors can be resolved without animosity.

Challenges

It goes without saying that this will be a really challenging time for both businesses and employees.  Businesses will need to try to balance both fairness for employees (especially those with childcare or other caring responsibilities) with the commercial reality that the business will be desperate to try to run as efficiently as possible to stay afloat. Employees will need to work with their employer to get through this situation so that they come out the other end with their employment intact. It won’t work in all cases, and some very heavy redundancies have already been announced.

The Roythornes Employment team is here to help employers and employees with interpreting the rules, drafting letters, advising on furlough agreements, preparing policy documents as staff return to work, etc, or assisting with redundancy procedures.

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