An introduction to the flexible furlough scheme

Under the new scheme, employees can work for part of the week, and be furloughed for the rest of the week. The employee can work for any amount of time and under any shift pattern, whatever is agreed with their employer. Equally employees may remain on furlough throughout the working week.

During the days the employee is on furlough, and subject to the consent of their employer, they can as now take part in training, work for another employer or carry out voluntary work. They cannot on these days undertake any work duties for their employer or an associated employer.

As now, a furloughed employee continues to accrue holiday leave and can take holiday while on furlough. Holiday pay needs to be paid at the normal rate of pay in accordance with the Working Time Regulations.

The only employees eligible for furlough will be those who were previously on furlough, for at least three consecutive weeks, before 30^th June. This includes employees who have been advised to shield for medical reasons. There is an exception for employees returning to work after 10^th June from statutory parental leave such as maternity leave.

The number of employees that an employer can claim for in any claim period, from 1^st July, cannot exceed the maximum number of employees it claimed for under any claim ending on or before 30^th June (with an exception for employees returning from statutory parental leave). While the rationale for this rule is to prevent abuse of the scheme by unscrupulous employers, this rule may present challenges for employers who are looking to rotate furlough leave across a wide group of employees. In this situation they may need to submit weekly or fortnightly claims to HMRC, rather than a single claim each month.

The employer needs to have in place a new written agreement for employees on flexible furlough, or a collective agreement with a trade union. The flexible furlough agreement can last any amount of time, and an employee can enter into a series of such agreements. This enables employers to manage their staffing requirements on a week by week basis.

There will no longer be the minimum three-week period for furlough, and for example an employee could be placed on flexible furlough for just one week.

The first day on which claims can be made under the new scheme is 1^st July, and advance claims cannot be made before this date. The final day for submitting claims under the current scheme which ends on 30^th June, is 31^st July.

Claims through the HMRC portal must be for a minimum period of one week, unless the employer is claiming for the first few days or last few days in a month. Claims to HMRC can no longer cross over different calendar months. This is because of the staged introduction of employer contributions to furlough costs which starts on 1^st August 2020.

The wages claim to HMRC will be a pro rata claim based on 80% of salary, subject to the cap which is £2,500 per month. This cap will decrease from September when employers will have to meet 10% of the wage costs for furloughed employees, rising to a 20% contribution in October. The claim will be based on the proportion of hours not worked by a particular employee compared to their normal working hours.

The employer therefore needs to have certainty about the number of hours the employees are working, which will present a challenge for submitting any advance claims. If the employee works more hours than reported on the claim to HMRC, the employer will have to repay some of the grant.

For employees with fixed hours and pay, the reference period to be used for comparing their hours to normal working hours is the pay period before 19^th March 2020. The calculation process here for working out the number of usual hours for each pay period is as follows:

• Start with the employee’s contracted hours at the end of the last pay period ending on or before 19^th March 2020.
• Divide by the number of calendar days (including non-working days) in the repeating working pattern.
• Multiply by the number of calendar days in the pay period (or part-period) which is claimed for.
• Round up to the next whole number if the outcome is not a whole number.

In this calculation, the employer should disregard any days taken as annual leave, sick leave or family-related statutory leave.

The reference period for employees with variable pay is the higher of (a) the average number of hours worked in the 2019-20 tax year, or (b) the equivalent calendar period in the 2019-20 tax year (e.g. July 2019).

The HMRC guidance contains a series of worked examples showing how to make these calculations.

As now, furloughed employees can carry out duties as union representatives or elected employee representatives, for example in connection with collective redundancy consultation. These duties are not treated as being work carried out on behalf of the employer. This enables businesses to launch consultations about proposed redundancies while the affected employees remain on furlough.

The HMRC guidance continues to indicate (though not explicitly) that employees can be made redundant and given notice while furloughed, with claims made to HMRC covering (at least partially) their notice pay. A substantial number of businesses are already adopting this approach, particularly as they look ahead to the introduction of employer contributions to furlough costs.