Coronavirus Job Retention Scheme: what’s changing?

On Friday the Chancellor announced some important changes to the Coronavirus Job Retention Scheme:

• A claim can only be made in respect of employees who have been furloughed for the first time on or before 10 June;
• Employers will be able to bring furloughed employees back to work part-time from July (and still claim under the scheme for the hours the employee doesn’t work);
• A new taper requiring employers to contribute to furlough pay will be brought in from August; and
• The scheme will close completely on 31 October.

Closure to new entrants: 10 June deadline

From July onwards, it will only be possible to furlough employees who have already been furloughed for a full consecutive three-week period prior to 30 June. This means that employers can only claim under the scheme in respect of employees who were furloughed for the first time on or before 10 June 2020. It seems that it will still, however, be possible to put a previously furloughed employee who is working back onto furlough again after 1 July (provided they were earlier furloughed for the minimum three-week period). Given the 10 June cut off, employers who have not already done so should be reviewing staffing levels now; and making decisions on furlough as soon as possible.

Any claims in respect of the period to 30 June must be made to HMRC by 31st July. The first claims under the revised scheme can be made from 1 July. Claim periods will no longer be able to overlap months; and the number of employees claimed for in any claim period cannot exceed the maximum number claimed for under any previous claim under the scheme (potentially relevant if there have been periods of rotating furlough).

Flexible furloughing: part-time work permissible from July

From 1 July, employers can bring furloughed employees back to work part-time, while still claiming under the scheme for any normal hours not worked. Subject to what the guidance might say, it appears that there are no restrictions on the working pattern – so employers have discretion to decide on the most appropriate working hours and shift patterns, which might vary week to week. To be eligible for the grant, any new flexible furloughing arrangements must be agreed with the employee; and that agreement confirmed in writing.

If employees come back to work on reduced hours, employers will have to pay them their normal salary in terms of their employment contract for the hours they work. The government will not make any contribution for the hours worked. However, a claim can be made under the scheme for the hours furloughed employees are not working – meaning furloughed employees will still be entitled to 80% salary (subject to the £2,500 monthly cap) for their non-working hours.

The minimum period which can be claimed for furloughed hours will be a week; and both hours worked and the usual hours an employee would be expected to work in a claim period will be required for a claim. Further details are expected to be included in guidance to be published on 12 June.

Previous indications were that this change would happen from August but it has been brought forward by a month in order to get people back to work. However, organisations will only be able to bring furloughed employees back to work where either homeworking is an option; or the workplace is permitted to open in line with relevant government guidance. This is discussed in our legal update on the Brodies COVID-19 Hub.

Employer contribution to furloughed salary costs from August

A new taper requiring employers to contribute to furloughed salaries will be brought in from August 2020. However, furloughed employees themselves won’t see any changes in terms of how much they are paid or when (unless they go back to work part-time – see above).

• Until the end of July, the government will continue to reimburse 80% of salary, up to a cap of £2,500, plus the associated employer national insurance contributions and employer pension contributions that are paid on the subsidised furlough pay (up to the level of the minimum auto-enrolment employer contribution).
• In August, employers will be required to pay the employer national insurance contributions and employer pension contributions on furlough pay.
• In September, employers will be required to pay 10% of employees’ 80% furlough pay. Recoverable furlough pay will be capped at £2,187.50.
• In October, employers will be required to pay 20% of employees’ 80% furlough pay. Recoverable furlough pay will be capped at £1,875.
• For furloughed employees working part-time, the caps will be proportional to the hours not worked. The forthcoming government guidance should provide clarification as to how this will operate in practice.

We will issue a further update on the implications of the changes to the Job Retention Scheme after the government guidance is published on 12 June. FAQs for employers on coronavirus and furlough are also available on Workbox, our online HR and employment law site, which are free to view for all.

When considering how to manage employment costs in the current economic climate, businesses now need to factor in the additional costs associated with furloughed employees from August; and the fact that the scheme is closing at the end of October. For advice on the options and associated costs and risks, please get in touch with your usual Brodies contact.