• bearhr

ATTENTION! The new Flexible Furlough Scheme is Coming!

The Chancellor has announced the introduction of a new Flexible Furlough Scheme, which will come into effect on Wednesday 1 July 2020 and there will be some significant changes.

For the first time, your employees will be able to undertake some work for the business whilst furloughed.

During July, the Scheme will continue to run with no additional cost to the business owner, but from August the Government will pass part of the cost of furlough to the employer.

How will the new Scheme work?

From 1 July 2020 Employee will be able to work part time and receive furlough for

contractual days not worked

From 1 August 2020 Employer will no longer be able to claim Employer's National

Insurance and Pension Contributions for furloughed employees and

will need to fund these payments from their own funds.

From 1 September 2020The Government will reduce it's furlough grant for furloughed

employees to 70% and the employer must pay the other 10%

From 1 October 2020 The Government will reduce the furlough grant further for

furloughed employees to 60% and the employer must pay the other


31 October 2020 The furlough scheme will end and employers will be responsible for

all wages and salaries of their employees.

In Detail

In a bid to restart the economy, the Chancellor has recognised that for many employers, the leap from furloughed to full time working (and pay) is too much and so you will be able to bring employees back to work part time, say one or two days a week or perhaps one week a month, to do some work. You will have to pay them 100% wages but only for the days they work as you will be able to continue claiming furlough for their contractual days they don't work.

You will need to calculate their day rate and for the furlough element, that must still be claimed at 80% of their normal wage, capped at £2,500 per month. For clarity, if you have an employee who would normally work 5 days per week earning £500 per week, providing they were furloughed at some point on the old scheme, you can bring them back to work

for 2 days per week and pay as follows:

2 days 100% wages paid by employer £200

3 days furlough claimed at 80% £240

Gross pay £440

Businesses are currently able to claim additional grants for Employer's National Insurance and Employer's Pension contributions for furloughed wages but, from 1 August, that will cease and employers will have to take on this cost themselves.

In September, the Government will reduce its contribution to 70% and the employer must pay the outstanding 10% plus the employer's NI and pension. At this time there is nothing to suggest that the employer top up will be anything but mandatory. Based on the example above, this means the employee working 2 days per week (contracted for 5 days) would be paid as follows:

2 days 100% wages paid by employer £200

3 days furlough claimed at 70% £210

3 days furlough topped up by employer at 10% £30

Gross Pay £440

In October, the Government will reduce its contribution further to 60%, which will impact the business owner as follows:

2 days 100% wages paid by employer £200

3 days furlough claimed at 60% £180

3 days furlough topped up by employer at 20% £60

Gross Pay £440

This means that in July, it will cost the business £200 to have the employee working 2 days and furloughed for 3 days, and this cost will increase to £260 plus the associated employers payroll contributions by October.

With the scheme now scheduled to finish completely on 31 October 2020, from August the Government will pass some of the costs of the scheme to the employer and business owners would do well to review those still on furlough and whether it is likely that they will be able to return to their normal hours by 1 November.

Claiming Furlough

Any claims for payments from the old scheme, ending 30 June, must be made by 31 July 2020 as you will not be able to claim under the old scheme after this date.

Employees who were not furloughed at any point under the old scheme will not be eligible for furlough under the new scheme, unless they are returning to work from family leave, for example Maternity Leave or Shared Parental Leave.

As the new scheme is fairly complex and will change each month, you will not be able to claim for more than one month in the same claim, even where a month ends mid week.

However, unlike the old scheme, you will be able to claim in one week blocks as the 3 week minimum furlough period ends with the old scheme. This should give employers the greatest flexibility to get people working when they need them most.

Worried about Additional Costs

The pandemic has been catastrophic for many businesses and sadly, for some of them, it may not be possible to be 100% operational by 1 November. If that is a concern in your business then we strongly urge you to consider starting a redundancy process whilst the Job Retention Scheme still exist.

You have an obligation to consult with employees before making any redundancies, in some cases this will be for a minimum of 30 or 45 days, so it may be beneficial to do this whilst you are able to claim some percentage of the furlough payment.

You cannot claim furlough for Statutory Redundancy Pay or pay in lieu of notice (PILON) but, if the employee could have worked their notice had there been work available, then you are able to continue to claim furlough for the time you do not have work for them during their notice period. You would, however, have to top their wages up to 100% whilst on notice.

Need some help?

If your business doesn't employ an HR professional and you would like some help in applying the new legislation to your business, our HR Consultant can help. We offer practical and commercially focused HR support solutions without long term tie in clauses to support small businesses when they really need it most. Please get in touch today if you would like a free, no obligation discussion about the HR needs of your business and how we can help.