The Chancellor has announced that this scheme will close permanently at the end of October. However, before then, there are some major changes being introduced to this scheme which are outlined below.
1. Claim periods
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 organisation is claiming for the first few days or the last few days in a month. You can only claim for a period of fewer than 7 days if the period you are claiming for includes either the first or last day of the calendar month, and you have already claimed for the period ending immediately before it.
Up until 30 June 2020 organisations can make a furlough claim for any period from 1 March 2020 to 30 June 2020 and there is no restriction on the length of the period claimed for.
Therefore, where employees are furloughed for a period that begins in June and ends in July, two separate furlough claims will need to be made – one for the period to 30 June and another for the July period.
Claims for period ending on or before 30 June must be made by 31 July.
Employers can only make 1 furlough claim for any period so employers should have certainty in the amount they wish to claim before making the claim. This is particularly important where employees are flexibly furloughed.
2. Flexible working: Part-time furloughed employees – from 1 July 2020
From 1 July, employers will be able to bring back furloughed employees on a part-time basis. This will only apply, however, to employees that have previously been furloughed, for at least a period of three weeks, prior to 30 June. This effectively means that any employees not furloughed by 10 June under the current rules cannot be furloughed under the new arrangements.
The furlough scheme is also closing to new entrants from 30 June. This, therefore, means that 10 June is the final day an employer can furlough an employee for the first time. There are, however, some exceptions for those employees who return to work from statutory leave after 10 June. Please see ‘Employees returning from Statutory Leave’ section below.
There is no definition of what is classed as ‘part-time’ – it is down to the employee and employer to agree this. However, there must be a written agreement with the employee confirming the new part-time working arrangements.
If an employee is brought back on a part-time basis, the employer will be responsible for paying their salaries for the hours they worked, and these costs cannot be recovered from the Government. To do this an employer must first work out an employees usual hours they work and then record their actual hours worked.
Calculating usual and furloughed hours worked
There are two ways of calculating this depending on whether the employee works a fixed number of hours or a variable number of hours.
Fixed number of hours
- Start with the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.
- Divide by the number of calendar days in the repeating working pattern, including non-working days.
- Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.
- Round up to the next whole number if the outcome is not a whole number.
If an employee with fixed hours was on annual leave, off work sick or on family related statutory leave at any time during the last pay period ending on or before 19 March, the usual hours should be calculated as if the employee had not taken that leave.
Examples of how to calculate the usual and furlough hours is below.
Example 1
An employee is contracted to work for 35 hours in each week, across 5 working days. The employee is paid weekly. The employer looks to make a flexible furlough claim for the period between 1 July 2020 to 10 July 2020 (the employee is working flexibly 3.5 hours per day for 10 calendar days). There are two pay periods partially in this claim period:
29 June to 5 July
6 July to 12 July
The employer first calculates the usual hours for the days they are claiming for in the pay period 29 June to 5 July as follows:
- Start with 35 hours (the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020)
- Divide by 7 (the number of days in the repeating working pattern, including non-working days)
- Multiply by 5 (the number of calendar days in the pay period (or partial pay period) the employer is claiming for – this is a partial pay period) = 25 (if this is not a whole number it should be rounded up).
The employer next calculates the usual hours for the days they are claiming for in the pay period 6 July to 12 July as follows:
- Start with 35 hours (the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020)
- Divide by 7 (the number of days in the repeating working pattern, including non-working days)
- Multiply by 5 (the number of calendar days in the pay period (or partial pay period) the employer is claiming for – this is a partial pay period) = 25 (if this is not a whole number it should be rounded up.)
For this claim period, the result of each pay period’s calculation is added together (25 + 25 = 50 hours).
Therefore, the total number of hours worked (3.5 hours * 10 days = 35 hours) is deducted from the usual hours calculated above (50) to calculate the furlough hours to pay (15).
Example 2
An employee is contracted to work on a shift pattern of four consecutive 12-hour days and then have four days off. This working pattern repeats every 8 days. The employee is paid calendar monthly. Starting on 1 July the employer agrees with the employee that they will work four consecutive 6 hour days and then have four days off and looks to make a flexible furlough claim for the period 1 July 2020 to 31 July 2020 (31 calendar days). The pay period and the claim period align.
The employer calculates the usual hours for the July pay period as follows:
- Start with 48 hours (the hours your employee was contracted for in their repeating working pattern at the end of the last pay period ending on or before 19 March 2020 – which in this example, is 12 hours multiplied by 4 days)
- Divide by 8 (the number of days in the repeating working pattern, including non-working days)
- Multiply by 31 (the number of calendar days in the pay period (or partial pay period) the employer is claiming for) = 186
- The outcome of step 3 is a whole number, so does not need to be rounded up to the next whole number
Therefore, the total number of hours worked (6 hours * 16 days = 96 hours) is deducted from the usual hours calculated above (186) to calculate the furlough hours to pay (90).
Variable number of hours
The ‘usual hours’ in this case will be calculated based on the higher of either:
- the average number of hours worked in the tax year 2019 to 2020
- the corresponding calendar period in the tax year 2019 to 2020
You need to calculate the usual hours for each pay period, or part of a pay period, that falls within the claim period.
When you calculate the usual hours, you should include:
- any hours of leave for which the employee was paid their full contracted rate (such as annual leave)
- any hours worked as ‘overtime’, but only if the pay for those hours was not discretionary
To work out the usual hours for each pay period (or partial pay period) based on the average number of hours worked in the tax year 2019 to 2020:
- Start with the number of hours worked (including paid leave) in the tax year 2019 to 2020 before the employee was furloughed, or the end of the tax year if earlier.
- Divide by the number of calendar days the employee was employed by you in the tax year 2019 to 2020, up until the day before they were furloughed, or the end of the tax year if earlier.
- Multiply by the number of calendar days in the pay period (or partial pay period) you are claiming for.
- Round up to the next whole number if the outcome isn’t a whole number.
Example of how to calculate the usual and furlough hours is below.
1 – How to work out average number of hours worked in 2019/20 tax year
An employee started work for an employer in 2005. The employee is paid every two weeks and was furloughed on 23 March 2020.
The employer calculates that the employee worked 1,850 hours between 6 April 2019 and 22 March 2020. This includes any hours that the employee received holiday pay for.
The employee works for 25 hours for the pay period 1 July 2020 to 14 July 2020, and the employer is looking to make a flexible furlough claim for the same period (1 July 2020 to 14 July 2020).
The employer works out the average number of hours worked in the tax year 2019 to 2020 as follows:
- Start with 1850 (the number of hours worked (including paid leave) in the tax year 2019 to 2020 before the employee was furloughed)
- Divide by 352 (the number of calendar days the employee was employed by the employer in the tax year 2019 to 2020, up until the day before they were furloughed)
- Multiply by 14 (the number of calendar days in the pay period (or partial pay period) which the employer is claiming for) = 73.58
- Round up to the next whole number because the outcome is not a whole number = 74
The employer will also need to compare the answer above with the hours paid in July 2019 (the corresponding calendar period in the tax year 2019 to 2020) and use the higher figure for the usual hours.
Therefore, the total number of hours worked (25 hours) is deducted from the usual hours calculated above (74) to calculate the furlough hours to pay (49).
Further guidance and examples can be found here
3. Employees returning from Statutory Leave
An employer can furlough these employees for the first time provided that:
- They have previously submitted a claim for any other employee in your organisation in relation to a furlough period of at least 3 consecutive weeks taking place any time between 1 March 2020 and 30 June
- The employee they wish to furlough 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
- The employee was on the organisations 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
4. Restriction on the number of employees that can furloughed – from 1 July 2020
For periods starting on or after the 1 July, the maximum number of employees an employer can claim for in any period cannot be higher than the maximum number they have claimed for in a previous period. For example, if your highest single claim for periods up to 30 June was for 100 people, you cannot claim for more than this number in later periods.
However, if you have employees who have returned to work after 10 June from Atatutory Leave, and you are furloughing them, you may add these employees to the maximum. Therefore, using the example above, if an organisation wanted to furlough 5 employees for the first time, who had returned from Statutory Leave after 10 June, the maximum number of employees that could be furloughed is 105.
5. Employers’ contribution to furloughed staff costs
During July, there is no change to the government support for furloughed staff, subject to the employer paying the salary costs of the hours worked by those furloughed staff working flexibly, as noted above. However, changes come into effect from 1 August, as follows:
From 1 August 2020 – Employers National Insurance and Pension Contributions no longer funded.
From 1 August, the Government will continue to pay 80% of an employee’s salary (up to a maximum of £2,500). However, it will be the employers responsibility to pay the Employer’s National Insurance and employer’s pension costs which were previously also reimbursed.
From 1 September 2020 – Reduction in amount paid by Government to 70%
From 1 September 2020 the amount the Government will reimburse in respect of furloughed employees will reduce to 70% of their wages, up to a maximum of £2,187.50. However, crucially, the employer must still continue to pay the employees up to the previous minimum cap of 80% of their salary. The employer will also continue to be responsible for the payment of all Employer’s NI and employer’s pension contributions.
From 1 October 2020 – Reduction in amount paid by Government to 60%
From 1 October 2020 the amount the Government will reimburse in respect of furloughed employees will reduce to 60% of their wages, up to a maximum of £1,875.00. However, as noted above, the employer must still continue to pay the employees up to the previous minimum cap of 80% of their salary. The employer will also continue to be responsible for the payment of all Employer’s NI and employer’s pension contributions.
As mentioned above, the scheme closes on 31 October, so this will be the last month that a claim can be made under the scheme. From 1 July, claims cannot overlap a month because of the different rules applying to each month.
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Stephen Anderson
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