By Nic Hart
As advised, the Government Guidance for the new Flexible Furlough Scheme (FFS) was released on Friday evening – June 12th.
Accessibility to the new Guidance is not the most straightforward as the information is spread across the existing CJRS Guidance and three new pieces of Guidance. The Government has also produced a summary overview of the key changes to the CJRS and the timetable for the same.
The major changes to the existing scheme with effect from July 1st are:
- there will no longer be a minimum three-week period for furlough. Whilst there will not be a required minimum period to furlough employees, any claim made to the CJRS portal must be in respect of a minimum one week period regardless of how many days may have been worked in this one week period.
- Employers can no longer put in claims to the portal that cover more than one payroll period. All claims through the portal must start and end within the same calendar month.
- An employer cannot furlough any greater number of employees than have been furloughed previously – subject to the provisions of those returning from parental leave.
The key principles of FFS are clear. From 1 July, employers can bring furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim a CJRS grant for the hours not worked. Claim periods starting on or after 1 July must start and end within the same calendar month and must last at least 7 days. Wage caps are proportional to the hours an employee is furloughed. For example, in July an employee is entitled to 60% of the £2,500 cap if they are placed on furlough for 60% of their usual hours.
I have set out below a precis of the new FFS Guidance and the main changes to the existing CJRS Guidance.
Steps to take before calculating your claim using the CJRS
To claim under the new FFS an employer must work out:
Length of the claim period
Claims for any periods starting before 1 July must end on or before 30 June (even where an employee furloughed in June continues to be furloughed full time in July.)
Separate claims will need to be submitted to cover the days in June and the days in July, even if employees are furloughed continuously. This may mean that your claim periods will differ from the pay periods you use.
Claim periods starting on or after 1 July must start and end within the same calendar month and must last at least 7 day. You can only claim for a period of fewer than 7 days if the period you are claiming for includes either the first or last day of the calendar month, and you have already claimed for the period ending immediately before it.
The employer can only make one claim for any period so this must include all furloughed or flexibly furloughed employees in one claim even if they are paid at different times. If more than one claim is made the subsequent claim cannot overlap with any other claim that you make. Where employees have been furloughed or flexibly furloughed continuously (or both), the claim periods must follow on from each other with no gaps in between the dates.
The Guidance recommends that where possible, Employers should match their claim period to the dates they process payroll. Claims can be made before, during or after payroll is processed and there is no requirement to wait until the end of a claim period to make the next claim.
From 1 July each claim period must start and end within the same calendar month.
Claims for periods ending on or before 30 June 2020 must be made by 31 July 2020.
What you can include when calculating wages
This remains the same as set out in previous Guidance.
The employees’ usual hours and furloughed hours
When claiming for employees who are flexibly furloughed, the Employer must be certain of the exact number of hours they will have worked during the claim period. If a claim is made in advance and the employee works for more hours than advised, then the Employer will have to pay some of the grant back to HMRC.
If an employee is fully furloughed, there is no requirement to work out their usual and furloughed hours and Employers should instead work out the maximum wage amount.
Where an employee is flexibly furloughed, an Employer must work out the employee’s usual hours and record the actual hours they work as well as their furloughed hours for each claim period.
Normal working hours for those with fixed hours/ pay will be calculated by the number of hours worked in the pay period before March 19 2020. For those with variable hours this will be the higher of either the average number of hours worked in the tax year 2019-2020 or for the hours worked in the corresponding calendar period in 2019-2020.
There are two different calculations you can use to work out your employee’s usual hours, depending on whether they work fixed or variable hours.
The calculation for variable hours will be applicable where the employee is not contracted to a fixed number of hours or their pay depends on the number of hours they work.
If neither of these apply, then the calculation will be for an employee who is contracted for a fixed number of hours.
These calculations are set out in full in the Guidance.
Calculate how much you should claim
This new Guidance sets out examples of how to work out 80% of your employee’s usual wages to determine how much an Employer has to pay employees for the time they are furloughed and what the Employer can claim under the scheme.
It also sets out the further HMRC record keeping requirements for FFS.
- The Employers calculations in case HMRC requires more information about the claim
- The employees usual hours worked, including any calculations that were required for flexibly furloughed employees
- The actual hours worked for employees you flexibly furloughed
There is also a requirement for a new written agreement to be provided to any employee you wish to flexibly furlough (this is covered in other Government Guidance- further details below).
Example of Calculation for Flexible Furlough
This is new Guidance setting out an example of the full sequence of calculation steps that an employer must take when claiming through CJRS for a flexibly furloughed employee. It is based on an employee with a fixed monthly salary for fixed working hours which whilst not applicable to all, does demonstrate the sequence of steps to be taken to make a claim.
With regard to the existing Guidance, this has been updated as follows.
An employer can claim for any employees that have been previously furloughed for at least 3 consecutive weeks between 1 March and 30 June 2020.
The maximum number of employees claimed for in any single claim period starting from 1 July cannot exceed the maximum number of employees claimed for under any claim ending by 30 June. The cap may not apply if the Employer is including employees who are returning from parental leave who may be eligible for FFS.
If an Employer wants to flexibly furlough employees, this must be agreed with the employee (or reach collective agreement with a trade union) and a new written agreement must be provided that confirms the new furlough arrangement. The agreement must:
- be consistent with employment, equality and discrimination laws
- be kept for five years along with records of how many hours the employees work and the number of hours they are furloughed (i.e. not working).
From 1 July, agreed flexible furlough agreements can last any amount of time. Employees can enter into a flexible furlough agreement more than once.
Where a previously furloughed employee started a new furlough period before 1 July this furlough period must be for a minimum of 3 consecutive weeks regardless of whether the 3 consecutive week minimum period ends before or after 1 July. Whilst employers cannot make claims that cross calendar months it has been confirmed that the employer can still claim for this period but will need to make a separate claim for the period up to 30 June.
The flexible furlough agreements can last any amount of time up until the end of the CJRS but unless otherwise specified each claim must be for a minimum claim period of 7 calendar days unless the 7 days of the period the Employer is claiming for includes either the first or last day of the calendar month, and the Employer has already claimed for the period ending immediately before it.
Parental, adoption, paternity or parental bereavement leave
An employee returning from statutory parental leave after 10 June can be furloughed even if this is for the first time. This is subject to:
- the Employer having previously submitted a claim for any other employee in the business for a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June
- the employee started maternity, shared parental, adoption, paternity and parental bereavement leave before 10 June and has returned from that leave after 10 June
- the employee was on the PAYE payroll on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020
When calculating the maximum number of employees an Employer can claim for, those employees returning from parental leave should be added to any previous maximum the Employer claimed for in any one claim before 30 June.
Shielding/ Sick/ Carers
Employees who are shielding, have caring responsibilities, are self-isolating, or are long term sick on furlough can continue to be furloughed from 1 July as long as the Employer has previously submitted a claim for them in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June. If a furloughed employee becomes ill, due to Coronavirus or any other cause it is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate.
A new employer is also eligible to claim under the CJRS in respect of the employees of a previous business transferred after 10 June 2020 as long as:
- the TUPE or PAYE business succession rules apply to the change in ownership.
- the employees being claimed for have previously had a claim submitted for them by their prior employer in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June
In these circumstances, the maximum number of employees that the new employer can claim for will be the total of both:
- the maximum number of employees the new employer claimed for in any one claim ending on or before 30 June
- the number of employees that are being transferred to the new employer which have had a claim submitted for them in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June. This is subject the maximum cap the previous employer was subject to.
A new employer is also eligible to claim under CJRS in respect of the employees associated with a transfer of a business after 10 June 2020 from the liquidator of a company in compulsory liquidation where:
- TUPE would have applied were it not for the company being in compulsory liquidation.
- the employees being claimed for have been furloughed and a had a claim submitted for them by their prior employer in relation to a period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June.
In these circumstances, the maximum number of employees that the new employer can claim for will be the total of both:
- the maximum number of employees the new employer claimed for in any one claim ending on or before 30 June; and
- the number of employees that are being transferred to the new employer which have had a claim submitted for them by their prior employer in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June. This is subject to the maximum cap the previous employer was subject to:
For administrative purposes, employers must keep a copy of all records for 6 years including:
- the amount claimed and claim period for each employee
- the claim reference number for your records
- your calculations in case HMRC need more information about the claim
- for flexibly furloughed employees, the usual hours worked (including any calculations that were required) AND the actual hours worked
Employers can now tell HMRC about any overclaimed amount as part of their next claim. They will be asked when making their new claim whether any adjustment is required to take account of a previous error. The new claim amount will be reduced to reflect this. No further action is required but the Employer should keep a record of this adjustment for six years.
If an error has resulted in an underclaimed amount, the Employer should contact HMRC to amend their claim and HMRC will need to conduct additional checks.
If an Employer has made an error but does not plan to submit a further claim, HMRC are working on a process that will allow the Employer to notify HMRC of any error and pay back any amounts that have been overclaimed. An updated Guidance will be published when this is available.
Whilst the principles of FFS seem clear, the implementation will require additional administration and may put further pressure on payroll. I would suggest that it is worth looking at the worked examples as soon as possible as it will be key that Employers seeking to implement FFS make a plan/pattern now, for rotas post 1 July in order to allow payroll the best opportunity of being able to replicate the process going forward.
One final point, please note again that 31st July is the last date you can submit claims for periods ending on or before 30th June 2020.
For More Information
Do get in touch if you have any queries about flexible furlough or any of the changes to the scheme.