Furlough Updates – a new timeline for the grant and gradual contributions for employers

On 29 May 2020, the Chancellor, Rishi Sunak announced further changes to the Coronavirus Job Retention Scheme. Subsequently, an outline of the Chancellor announcement has been published on the government webpage and has been accompanied by a fact sheet and. Further guidance is expected to be published on 12 June. Below is a summary of the latest updates. As this is a fast-moving area of law, this blog should be read as correct at the time of publication and should also be read in conjunction with our earlier updates

The deadline for new entrants – 30 June 2020

Employers will not be able to furlough new employees after 30 June. As a minimum three-week furlough period needs to be completed by 30 June, the employers considering placing new employees on the Scheme would need to do so by the latest 10 June 2020. However, employers currently using the Scheme for the employees previously furloughed can continue to benefit from the grant.

Part-time furlough

The government has changed the previous rule that the employees are prohibited to work for their employers while on furlough. From 1st July 2020 onwards, employers have the option to bring the employees back to work on a part-time basis. Consequently, an employer would enter into full furlough arrangements with some employees and part-time furlough arrangements with others.
For the full-time furloughed employees, the Scheme will continue as before with the employer being able to claim full furlough grant and no contribution required from the employer (until August 2020).
For the partial furloughed employees, an employer would be able to claim a proportion of the grant for the non-working time provided that the claim periods are of a minimum of one week. Conversely, for the balance of hours worked by the employees, the employer would pay the salaries and employer’s National Insurance Contributions (NICs) and pensions contributions. In his announcement, the Chancellor gave as an example an employee who normally works five days per week and returns to work for two days per week, the employer will pay the wage and contributions for the two days, the remaining three days being covered by the Scheme.

Grant scaled back and introduction of employer’s contribution – 1st August 2020

The government intends to ‘share’ the costs of the Scheme with the employers by tampering down the grant and requiring employers to make gradual contributions toward the furlough pay.
From August 2020 – employers will have to pay employer’s NICs and pensions contributions for the non-working time. The government will continue to pay the full grant capped at £2,500.
From September 2020 – in addition to paying NICs contributions and pensions contributions for the non-working time, the employers will begin paying 10% towards the pay for the furloughed employees, with the government paying 70%
From October 2020 – employers’ contribution will increase to 20% of furlough pay, with the government paying 60% plus employer pay employer’s NICs and pension contribution for non-working hours.

Closure of the Scheme

After being extended a couple of times and then gradually phased out, the Scheme is due to end by 31st October 2020. The employers need to be mindful of their obligations to write to employees to inform them of the ending of the Scheme.

Final considerations

As these updates bring some changes to the current furlough arrangements, it is recommended that new furlough agreements and new working agreements should be concluded in writing with the employees returning to work on a part-time basis. The employer will need to keep good records of the working hours for these employees.
Some of the employers will be placed under a financial strain by these changes and might consider other options, such as redundancy. These employers should be mindful of the specific requirement to be followed, particularly of their obligation to conducting a minimum 45 days of collective consultation.

Contact us

If you are having queries or need assistance on how the scheme works, please contact our team of employment specialists today.