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Job Retention (Furlough) Scheme & Flexible working

Guidance released on flexible furlough
 
Late on Friday the Government released guidance on the operation of the flexible furlough scheme which comes into effect on 1 July.  The key features are as follows
 

When can a claim be made?

 
• The last date for making claims for periods up to 30 June is 31 July.  No claims for this period will be able to be made after that date.
 
• It will not be possible to claim for periods which straddle 30 June.  If a pay period runs both before and after 30 June separate claims will need to be made for the period up to 30 June and the one commencing on 1 July.
 
• The first date on which claims can be made will be 1 July – it will not be possible to claim for July periods before this date.
 
WR Comment – it will be unlikely for employers to be looking to claim for July periods prior to 1 July, however, it is critical for employers to note that the last date for claiming for periods up to 30 June is 31 July.  It is likely the system will be extremely busy in the run-up to 31 July so we would strongly recommend preparing and submitting claims for the period to 30 June as soon as possible.  This will particularly be the case where you outsource your payroll to an external provider as they are likely to be extremely busy around the end of July!
 

Who can be claimed for?

 
• It will be possible to claim for all employees in respect of whom a claim under the Job Retention Scheme was successfully made.  This will include any employee who was furloughed for a minimum period of three consecutive weeks at any time between 1 March 2020 and 30 June.  There is no requirement for an employee to be furloughed on 30 June 2020 in order for them to qualify under the flexible furlough scheme from 1 July.
 
• The last day an employee could have started furlough for the first time was 10 June.
 
• Employees who were previously made redundant or left the employer and are subsequently brought back onto the payroll can only be claimed for if they completed the minimum three week furlough period by 30 June.
 
• The only exception to the above is in respect of employees returning from extended parental leave after 10 June.  These employees can still be furloughed for the first time after that date if they meet the following criteria:
 
  1. The employer has previously submitted a claim for any other employee in their organisation in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June
  2. The employee intended to be furloughed for the first time started maternity, shared parental, adoption, paternity and parental bereavement leave before 10 June and has returned from that leave after 10 June
  3. The employee was on the employer’s PAYE payroll on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020
 
• Employees who are shielding under Government Guidance or who have caring responsibilities can only be furloughed after 1 July where they have completed a minimum continuous three week period of furlough in the period 1 March to 30 June in the same way as any other employees.  
 
This means that an employee who has been shielding but has not been placed on furlough up to now will not be able to be furloughed under the flexible furlough scheme even if they stop being required to shield and can return to work.  Similarly any employee, who is required to start shielding or takes on caring responsibilities after 10 June 2020, will not be able to be furloughed.  The same applies to employees who are self isolating
 
• The effect of all of this is the maximum number of employees who can be claimed for under the flexible furlough scheme will be the total number of employees for whom a furlough claim was made for periods prior to 30 June plus the number of employees returning from parental leave after 10 June.  
 
WR Comment – it is pleasing to see that, as long as employees have completed the minimum three weeks furlough at some point prior to 30 June they will still be eligible to be furloughed under the flexible furlough scheme even if they have returned to work after that period.  The initial guidance was ambiguous on this point to the clarification is welcome (albeit it has come after the last date for putting employees on furlough for the first time).
 
The relaxation regarding employees returning from parental leave is a welcome one and while potentially only of limited application it will allow employers to protect the jobs of these individuals when they are due to return to work.  On the flip side the treatment of shielding employees and those with caring responsibilities seems at best short sighted although there appears to be a degree of political pressure to reconsider this decision.
 

How will flexible furlough work?

 
• For claim periods starting after 1 July, employers can bring qualifying furloughed employees back to work for any amount of time and any shift pattern, while still being able to claim Coronavirus Job Retention Scheme grant for the hours not worked.
 
• HMRC has published an example of how to calculate the amount of a grant claim for an employee who is flexibly furloughed – the example is here:
 
 
• Because of the changes to the rate at which grants will be paid from 1 August, claim periods starting on or after 1 July must start and end within the same calendar month and must last at least 7 days unless the claim is for the first few days or the last few days in a month. A claim can only be made for a period of fewer than 7 days if the period being claimed for includes either the first or last day of the calendar month, and a claim has already been made for the period ending immediately before it.  This may mean it is not possible to match the period of claim with the period for which payroll is processed.
 
• Employers should not make a claim for an employee who is flexibly furloughed until they are certain of the number of hours worked by the employee in the claim period.
 
WR Comment – the flexible furlough scheme will be welcomed by employers who are able to gradually reopen as lockdown restrictions progressively ease.  However careful planning will be needed to ensure that the hours worked by employees who move onto flexible furlough are, as far as possible, matched to the level of work required – this may prove to be a challenging exercise.
 
The need to calculate both full pay for hours worked and furlough pay for the hours which are not worked means the calculations required on a month by month basis are likely to be complex.  This will be compounded by the changes in the level of government grants which progressively decrease from 1 August.  The need to make claims for periods only within the same calendar month (driven by the changes to the level of grants) also mean employers may find themselves making a significantly increased number of claims where pay periods straddle a month end.
 
The need to ensure that the split of hours worked and hours on furlough in any given pay period is also likely in many cases to mean that claims cannot be made until after the end of the pay period in question – something which may introduce delays into the time taken for grants to be received.
 

Other considerations

 
The move to flexible furloughing is likely to present complexities over and above the process of calculating and making furlough claims.  Employers were required to meet certain legal requirements as part of placing employees on furlough in the first place – requirements which were heightened where, for example the employee in question was a director or other officer of a company.  Employers will need to consider the potential for similar requirements as they move employees onto flexible furlough – for example where a full time employee returns to work on a part time basis, potentially in a situation where flexibility around hours work will be required.  As the scheme progresses towards its end on 31 October and the level of costs borne by the employer for furloughed staff increase the question of whether furloughed staff have a long term role with the company is likely arise in many cases.  
 
Changes to flexible furlough and consideration of the longer term future of furloughed staff bring with them a raft of HR, financial, tax and employment law considerations.  Employers need to be planning for all of these eventualities as soon as possible in order to avoid potentially costly and damaging issues in the future.   
 
15 June 2020 | Written by Paul Brown, Tax Partner 

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