Coronavirus Bulletin – Part 5
In June, the government provided details of the changes to the Coronavirus Job Retention Scheme (furlough scheme) which apply from 1 July 2020. In this bulletin we look at how employers can use the more flexible scheme to implement beneficial changes to how their business works, together with taking steps to avoid having to lose valuable staff through redundancy. The information set out in this bulletin is accurate as at 3 July 2020.
The main implication of the new scheme is that from 1 July, employees on furlough leave are allowed to carry out work for any amount of time and under any work pattern. This is known as “flexible furlough” and represents a significant change from the previous rules, which were more rigid. However, be aware that the new term “flexible furlough” also includes the notion of no work, so you can still retain employees on furlough full time. Indeed, you may wish to do this until the scheme starts to cost you, and then bring employees back part time.
Employers will have to pay their employees for the hours worked but will still be able to claim the grant for hours not worked. The amount of the grant will gradually taper from 1 August (starting with employers having to pay pension contributions and employer’s National Insurance contributions (NICs)) through to the end of the scheme on 31 October 2020.
Interestingly, according to figures from HMRC, only 45% of employers who are using the furlough scheme are claiming back employer NICs and pension contributions. Make sure you do claim this for July.
Remember, to be eligible for the grant, furloughed employees have to be paid at least 80% of their wages (up to a cap of £2,500 per month) for the time they are being furloughed. You can also still choose to top up wages.
These changes allow businesses to be more creative about what work may need to be done, by which employees and how, when and where that work might be done.
Does it apply to all staff?
From 1 July you can furlough employees for whom you have already made a valid claim under the scheme prior to 30 June.
That said, such employees do not have to have been on furlough as at 30 June. You could, for example, choose to bring someone back to work who has been on furlough for several weeks, or choose to put someone on flexible furlough who had been back at work full time, but who had been furloughed in the past. Also, if any employees are returning from family related leave (i.e. maternity, shared parental, adoption, paternity, parental bereavement leave) they can be put on flexible furlough even if they are being furloughed for the first time (provided you have validly furloughed other employees in the past).
Flexibility and options
The new scheme provides an excellent opportunity for employers to maximise the benefits of flexible working. Many may not need employees back full time and so can propose to employees which hours and days they are needed back at work, as the needs of the business dictate. This will be particularly relevant for those employers who are just opening up again such as in the hospitality sector, or those where business is just picking up as things open up gradually. We would advise that you consider how long each employee’s role can be sustained and will be needed in the future.
Employers can also continue to rotate groups of employees on and off furlough. This can now be done in a more flexible way as the requirement for a minimum period of 3 weeks on furlough has gone. A “week on, week off” pattern may meet needs better. However, be aware that the number of employees you claim for in a period from 1 July cannot exceed the maximum number claimed for previously. By way of example, assume an employer has been rotating a total of 100 staff by furloughing half one month and half the next month. In total the employer has only claimed for 50 employees in any one claim period (even though not the same employees) so it can only claim for a maximum of 50 in a claim period from 1 July. Therefore, the employer could not now claim for all 100 employees working on a part time basis from 1 July or for 50 employees on part time furlough and 50 on full time furlough. This therefore limits your ability to bring back more people than previously part time. Changing the period of rotation could be a better solution in any event as it may be better for social distancing in the workplace to not have all employees back.
You can also choose to keep employees on full time furlough if you do not yet need people to come back part time. You can choose to bring them back part time at any point up to the end of the scheme. However, the scheme will start costing you from 1 August so you should start planning now as to whether and how that cost will be borne. Will you keep employees on full time furlough and pay the additional costs of their employment? If not, you will need to plan to end employment by 31 July 2020 to avoid these additional costs, whilst bearing in mind the legal risks inherent when terminating somebody’s employment. The costs will increase further through to the end of the scheme.
You may be able to get employees to agree to a further reduction in pay whilst on furlough. This may also need to extend beyond 31 October 2020 when the scheme ends if you wish to continue paying staff less or rely on layoff or short time working, if you have changed your contracts to include this right. In accordance with the rules of the scheme you should not continue employment if you know that there will be no work into the future.
If you are using the furlough scheme to pay notice pay we would advise you to contact the HMRC helpline for confirmation that this can be done, until guidelines are issued providing specific clarity on this point. You should keep a record of your conversation on the point too. Records need to be kept to 30 June 2025.
Remember also that employees will still be accruing their holiday entitlement, so this is an additional cost that the business has to bear, even if redundancies are made at a later date. Or you can make plans to give notice for them to take holiday, whilst flexibly furloughed.
Many businesses still have people working from home, and this system may have been operating well. As people start getting back to work it may be the case that, with the employees’ agreement, working from home can continue on a permanent basis and that the need for office space can be reduced. This has become known as “intentional working from home”. Employers may want to consider employees working from home for part of the week and then coming into the office for meetings or on set days. It may be possible to save significant costs by downsizing the office space. If companies are operating a hot desking policy, or are otherwise requiring staff to attend the office, then the employer’s health and safety obligations will need to be carefully considered, which include requiring a thorough cleaning of the space on a daily basis.
If people have been working reduced hours by agreement either for their own childcare purposes or due to the needs of the business, you may wish to ask the employees if they would like to continue the reduced hours on a more permanent basis. This will be particularly useful if you don’t have enough work as of yet for them to return to full time hours. Having worked in this way for several months some employees may decide that such a working pattern suits them and have found new ways of delivering their work within such hours. This may avoid a number of redundancies where there remains reduced work.
Whatever you agree with your staff going forwards, we strongly advise that this agreement is recorded in writing. If you flexibly furlough employees, it is a requirement of the scheme that you agree this with the employees (or have a collective agreement with unions) and keep a new written agreement that confirms the new furlough arrangement. The letter should set out hours required to be worked, what will be paid and provide that the arrangement can be varied as you go along in accordance with the work that there is to be done. There is a valid argument that this should have been in place by 1 July 2020.
To comply with the new terms of the flexible furlough scheme you should send an updated letter to all employees who remain on furlough past 30 June 2020, even if you don’t currently have any work for them, to record their agreement to their status for the period from 1 July to 31 October 2020.
We can help you
We appreciate that the furlough scheme rules are complex and frequently changing. As a firm, Jones Chase fundamentally believes in helping both businesses and people with all their employment law needs, hence we are releasing free content relating to the coronavirus pandemic.
Feel free to contact us should you wish to receive support. For example, we can provide advice in relation to:-
1. the effective use of the flexible furlough scheme;
2. creating a flexible furlough agreement;
3. varying employment contracts to apply to lay offs, part-time or short time working;
the steps that employers should take to get staff to safely return to the office.
You will receive a bespoke consultation on your options and tailored plan regarding the steps that you can take to help your business flourish.
We would be delighted to work with you.