From 1 July 2020 the Coronavirus Job Retention Scheme (CJRS) is changing. Businesses will be given the flexibility to bring furloughed employees back to work part time and still claim under the CJRS.
But, for claims from 1 July onwards, CJRS will only be available to employers that have already used the scheme and only in respect of employees they have previously furloughed for the current minimum of three weeks. The scheme in its current form will close on 30 June, with the last three-week furloughs before that point having to have started on 10 June at the latest.
Unfortunately the HMRC Guidance on 'flexible furlough' is not being published until 12 June, two days after that crucial 10 June final date. So employers only have a week to decide whether to furlough employees for the first time to be eligible to use the new CJRS from 1 July onwards for those employees.
What we know so far
The Chancellor's Statement on 29 May sets out the new tapering rules but gives very little detail of the rules that will apply to flexible furloughing, see our earlier alert, COVID 19: CJRS mark 2 - Chancellor announces next steps.
In addition to the Statement, the Government has issued a Factsheet for SEISS and CJRS schemes. While we await the HMRC 12 June guidance, the Factsheet does tell us that from 1 July:
- Employers can bring back to work employees that have previously been furloughed for any amount of time and any shift pattern, and still claim CJRS grant for their normal hours not worked.
- Employers will be able to agree any working arrangements with previously furloughed employees.
- When claiming the CJRS grant for furloughed hours, employers will need to report and claim for a minimum period of a week, but claims for longer periods such as monthly or two weekly cycles will also be allowed.
- To be eligible for the grant, employers must agree with their employees any new flexible furloughing arrangement and confirm that agreement in writing.
- Employers can claim the grant for the hours their employees are not working calculated by reference to their usual hours worked in a claim period. Further details will be included in future guidance.
- Employers will need to report hours worked and the usual hours an employee would be expected to work in a claim period.
- For worked hours, employees will be paid by their employer subject to their employment contract and employers will be responsible for paying the tax and NICs due on those amounts.
- The scheme will only be available to employers that have previously used the original scheme in respect of employees they have furloughed for a full three-week period prior to 30 June. This means that the final date by which an employer can furlough an employee for the first time will be 10 June. Employers will have until 31 July to make any claims in respect of the period to 30 June.
- The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current CJRS.
Points employers should note
- From 1 July 2020 employers can only claim from the CJRS in respect of employees who were furloughed on or before 10 June 2020. The Factsheet indicates that the employee doesn't have to be on furlough at the point the new scheme is introduced, provided that they have been validly furloughed (for a minimum three week period) before that. This will allow an employer to re-furlough employees who were subject to a rotating furlough arrangement before the introduction of the new scheme.
- From 1 July onwards claim periods must be limited to a calendar month to fit in with the changing level of grant; overlapping months will only be permitted before July. The period claimed needs to be for at least three weeks before July but will only be at least one week from 1 July onwards. The shortening of the claim period together with the statement that employers will be able to agree any working arrangements with previously furloughed employees appears to be an indication that the current requirement that furlough periods must be for a minimum of three weeks, will not apply after 1 July. We await the further 12 June guidance.
- ·The agreed new flexible furlough working arrangement must be confirmed in writing. Under the existing rules employees are prohibited from working for their employer throughout the furlough period and their current furlough agreement should make this clear. Under flexible furlough, employees may have a mix of working time and furlough time in the furlough period. An existing furlough agreement will need to be amended by a side letter, or a fresh furlough agreement entered into, which permits the employee to work during furlough and deals with the circumstances in which the employer can require the employee to work. The difficulty for employers at this stage is that the government has not yet announced the full detail of the changes to the CJRS in order to draft the new furlough agreements and get them agreed with employees before 30 June. There will only be a short period between 12 June and 30 June to do so.
- The factsheet states that the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim pre 1 July. This could be relevant where the employer has been operating rotating furlough arrangements under the current rules as it may impact on how many staff it can afford to bring back part time.
What to think about: example scenarios
While the flexibility to bring staff back part time without being debarred from the CJRS funding is welcome, the way it is being introduced does pose challenges for employers. Planning without the detailed guidance is difficult and the choices employers will need to make in terms of which staff to bring back and for how long, involve balancing a number of factors such as practicability, affordability and employee relations.
Example A - Staff furloughed under pre-1 July Scheme
Employer A furloughed all its staff in March who have remained on furlough since then.
From 1 July Employer A can:
- continue to furlough all staff and claim under the CJRS; or
- bring some or all of its staff back to work for any amount of time and any shift pattern on flexible furlough and claim under the CJRS.
Example B - Staff have not been furloughed under pre-1 July Scheme
Employer B has not yet furloughed any staff, instead they put all staff on short time working of 50% of normal hours and pay.
From 1 July:
- If Employer B has not furloughed any employees by 10 June, it will not be able to use flexible (or non-flexible) furloughing to claim under the CJRS.
- If Employer B furloughs some employees by 10 June and keeps them on furlough for three weeks (during which they can do no work), it can bring some or all of those furloughed staff back to work for any amount of time and any shift pattern on flexible furlough and claim under the CJRS. It cannot use CJRS for those staff not furloughed by 10 June. However, employers should consider staff relations as some staff would earn 80% of their reference salary (19 March) for not working at all or for part of the time post 1 July, while other staff not furloughed would only receive 50% of pay for working 50% of the time.
- If Employer B furloughs all its employees by 10 June and keeps them on furlough for three weeks (during which they can do no work), on the face of it, it is in the same position as Employer A above. However, will HMRC view this as an abuse of the system? This seems a low risk given the government has introduced a cut-off point for accessing the scheme, but we await further guidance.
Example C - Rotating furlough
In March, Employer C divided its 100 strong workforce into two groups of 50 each, rotating employees in Group X with Employees in Group Y on four weekly furlough. Can Employer C now put all workers on flexible furlough so everyone works half a week?
Highly unlikely. The number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous (pre-1 July) claim. So if the maximum number claimed for under a pre-1 July claim period was 50, that is the maximum number it can claim for a claim period post 1 July. Instead:
- The employer could consider placing all staff on furlough for the three weeks from 10 June to bolster the maximum number claimed for under a pre-1 July claim. However this may not be practicable and see the potential risk of abuse mentioned in Example B.
- The shortening of the claim period from at least three to at least one week may mean one weekly rotating is possible (we await the further guidance that is to be published on 12 June).
Example D - Employer using a combination of short time working and furloughing
Employee D normally works full time five days a week. In March, all employees agreed contractual variations to reduce their hours by 20% to four days a week, with the possibility of also going on furlough at some point. Employee D furloughs for at least three weeks in May and returns to work after that furlough period to work four days a week.
If Employee D is placed on flexible furlough on 1 July to only work two days a week for which the employer pays them two days' full pay, is the 80% grant under the scheme based on three days not working or only two days not working?
The factsheet states "the cap will be proportional to the hours not worked" but is this based on pre-19 March hours or on any subsequent contractual variation of hours? How you determine hours not worked in a situation where the employer has agreed short time working with the option for periods of furlough is currently unclear.
Example E- Rotating furlough and short-time working
All employees normally work full-time five days a week. In March, all employees agreed contractual variations to reduce their hours by 20% with the possibility of also going on furlough. The employer divides the employees into two groups of rotating employees, those in Group X rotating with Employees in Group Y on three weekly furlough with staff working a four day week when not on furlough.
Can the employer now put all employees on flexible furlough so everyone works two days a week?
Again, highly unlikely. See example C above.
Timeline
10 June 2020
Any employees being furloughed for the first time must be placed on furlough by this date for a minimum period of three weeks.
12 June 2020
Further guidance to be published
30 June 2020
CJRS closed to new entrants
1 July 2020
The new flexible furlough scheme starts for employers who have used CJRS already but only in respect of employees previously furloughed. From 1 July, employees can be partly furloughed and partly working and the grant can be claimed for the hours not worked.
31 July 2020
Final date for employers to make claims for the period to 30 June 2020
1 August 2020
Level of the grant employers can claim under the CJRS will progressively reduce. The government will pay 80% of wages up to a cap of £2,500. Employers will pay ER NICs and pension contributions
1 September 2020
The government will pay 70% of wages up to a cap of £2,190. Employers will pay ER NICs and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
1 October 2020
The government will pay 60% of wages up to a cap of £1,875. Employers will pay ER NICs and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
31 October 2020
CJRS closes