The information in this blog is correct as at 3 June 2020. For the most up-to-date Employment Law and Health & Safety advice to support your organisation through the COVID-19 pandemic, visit our Coronavirus Advice Hub, which is updated daily and contains a variety of free guidance notes, letter templates, checklists, risk assessments and more.
As more businesses are unleashed from lockdown, Chancellor Rishi Sunak has laid out the government’s plans to gradually withdraw the Job Retention Scheme.
According to data, one million firms are currently utilising the scheme, which has now been extended until October – so, while nothing will change until July, what does the future of furlough look like?
With 8.4 million workers having been furloughed by their employer at a cost of around £14 billion per month, the Chancellor has announced that from August, employers will be asked to foot some of the bill.
While workers will continue to receive 80% of their regular wages up to £2,500 for the remainder of the scheme, from 1 August, employers will be required to cover National Insurance and minimum pension contributions for employees who remain on furlough, in the way that they normally would before the scheme was introduced.
In addition, businesses still utilising the scheme in September will have to contribute 10% towards the 80% wage subsidy, rising to 20% in October. In other words, in September, employers will have to contribute 10% up to £315.50 and the government will cover 70% up to £2,187.50. In October, employers will have to put in 20% up to £625 and the government will fund the remaining 60% up to £1,875. As usual, employers can choose to top-up their contributions so that the employee receives 100% of their regular wage if they wish.
While many will have been relieved to see the scheme extended, a survey by the Institute of Directors has suggested that a quarter of members utilising the scheme will struggle to fund any percentage of payments, leading to difficult decisions for employers. Indeed, though the scheme’s fundamental aim was to prevent mass lay-offs, once employers’ costs start to increase, tough questions will need to be asked as to whether it is viable to keep an employee on, meaning more redundancies may be inevitable from as early as mid-June.
Though certain businesses have been given the green light to reopen, in sectors such as retail it is likely to be some time before customer demand returns to pre-crisis levels. Because of this, plus the fact that some will be operating a reduced workforce in order to meet social distancing guidelines, employers argued for the scheme to be more flexible.
In response to pressure from business groups now that more sectors are reopening, the Chancellor has announced that furloughed staff will be allowed to return part-time from July – rather than August as initially suggested – without losing out financially.
In practical terms, furlough will only be payable for the hours that an employee is NOT working. Any part-time work undertaken by the employee while furloughed should be paid by the employer at their full rate of pay, and this amount should be deducted when claiming. This will allow employees to earn more than the 80% furlough pay and allow businesses to bring staff back as they gradually restart their operations.
The minimum claim period for flexible furlough will be one week but longer claim periods are permitted.
Deadline to apply
Employers have only until 30 June to furlough additional employees. After this date, no new claims will be accepted – so employers who have not needed to use the scheme so far but who may require financial support between now and October will need to act quickly to avoid losing this potential lifeline. Note that there has been no change in eligibility criteria; workers who were eligible before will be eligible for the extension.
As it stands, the scheme is still due to close at the end of October. However, as it has been extended twice already, a further extension is possible. For now, though, the above is definitive.
Director of Legal Services
This is certainly a welcome and pragmatic solution offered by the government. It will allow returns to work part-time, giving employers the flexibility to match demand and resourcing levels whilst at the same time ensuring employees do not lose out.
However, questions still remain. For example, if the grant from HMRC is for hours the employees are not working, calculated by reference to the hours they would have usually worked in a claim period, how should this be calculated for workers with variable hours? Further, in respect to closure to new entrants, it is not clear whether an employee must be furloughed as at 30 June in order to continue to be furloughed beyond that date or, perhaps more likely, that an employee must have been furloughed for a three-week period at any time prior to 30 June.
Thankfully, the Chancellor has confirmed that guidance on the flexible furlough regime will be published on 12 June, so employers should get clarification on these points soon.
Need more advice on topics like this?
From furlough to self-isolating staff and the potential for redundancies, COVID-19 has greatly impacted workforces everywhere. Our Coronavirus Advice Hub offers a free source of regularly updated guidance from Employment Law specialists, backed by other useful resources to help you manage these employment curveballs quickly and compliantly.