Flexible furlough – the devil is in the detail

Authors: Amanda Beaumont – Partner – Kennedys & Matthew Lake – Partner – Kennedys

As set out in our briefing on 1 June 2020, the Government announced that its contribution to wage costs during furlough is reducing with effect from 1 August 2020 and, with effect from 1 July 2020, employers will have the option to be more flexible in its approach to furlough. The latest Guidance documents, published late Friday night (12 June 2020), now provide the all-important detail for the new furlough arrangements from July:

Who is eligible?

Only those employees who have been furloughed for at least three consecutive weeks prior to 30 June 2020 are eligible to be furloughed after 30 June, whether or not they are to be fully-furloughed or flexibly-furloughed.

This eligibility will include employees who transfer over to the employer after the 10 June “new entrants” cut-off date under TUPE (the Transfer of Undertakings (Protection of Employment) Regulations 2006), provided they have been furloughed for at least three consecutive weeks prior to 30 June 2020. In our view, whilst the point has generated some uncertainty, this is likely to include both ‘service provision change’ type relevant transfers as well as conventional business transfers.

The only exception to the “previously furloughed” rule is employees returning from extended statutory leave (such as maternity, paternity, adoption or parental leave) – those employees can still join the scheme notwithstanding the 10 June 2020 cut-off date, provided that they were on the relevant leave as at 10 June and otherwise meet the eligibility requirements.

What does “flexible furloughing” look like?

Whilst it will remain possible to continue to fully-furlough staff after 30 June, the most significant change to the regime is the new ability to flexibly-furlough staff from 1 July onwards whereby employees can return to work part-time and remain furloughed for the remainder of the normal working time.

There are no particular rules about the working/furloughing patterns that can be agreed – the guidance makes clear that “employers can bring furloughed employees back to work for any amount of time and any work pattern, while still being able to claim the grant for the hours not worked”.

Whilst employers should bear in mind the administrative complexities of an ever-changing furlough pattern, it is for the employer to decide what hours of work/furlough will be required to meet the needs of the business and then agree this with the employee. Employees may be furloughed for part of the week and work the remainder, or furloughed on and off for short periods at a time. Of course there is no obligation for employers to move to flexible furloughing – they may still choose to agree with employees that they will be furloughed full time if they wish.

For new furlough periods starting after 1 July 2020, the minimum three week consecutive furlough period no longer applies. That said, any period of furlough that starts before 1 July 2020 must still last for at least three consecutive full weeks before any alternative flexible arrangement may start.

How can an employer flexibly furlough its employees?

Agreeing flexible furlough

Having determined what working patterns best suit the business, the employer seeks to agree this with the employee (or trade union where collective bargaining applies). As before, the arrangement needs to be recorded in writing and notified to the employee, and a copy needs to be kept by the employer for five years. Existing furlough agreements, if properly drafted, will state that a furloughed employee cannot carry out any work for the employer and furlough will be for a minimum of three weeks. These will therefore need to be replaced by new agreements where the employer intends to make use of the new flexible scheme, setting out the new working arrangements.

Making a claim under CJRS

The rules relating to the claim process itself have also been updated.

Any claim in respect of the period before 30 June 2020 must be made by 31 July 2020.

From 1 July 2020, claim periods must start and end within the same calendar month and must be at least 7 days (unless the claim includes either the first or last day of the calendar month, and the employer has already claimed for the period ending immediately before it). Claims cannot span multiple calendar months, but an employer can make more than one claim per month.

There are also restrictions on the number of employees an employer can claim for with effect from 1 July 2020. This cannot be more than the maximum number of employees claimed for under any claim by the employer prior to 30 June 2020. For example, if an employer made CJRS claims in April, May and June for 40, 50 and 60 employees respectively, the maximum number of employees that can be claimed for post-1 July 2020 will be 60. There are exceptions to this, such as in relation to TUPE-inherited employees and employees returning from family-related leave after 10 June.

How much can be claimed?

The Guidance sets out complex rules for calculating the amount which can be claimed under the CJRS, supported by the updated calculator and a set of examples working through different scenarios.

Simply put, an employee is entitled to 80% of their wages for the proportion of the their usual working hours spent on furlough. How much of that 80% can be reclaimed under the CJRS will reduce with effect from 1 September 2020 (as detailed here) at which point the employer will be required to “top up” the Government’s contribution so that the employee still receives 80% of their wages for any time spent on furlough.

The starting point of the calculation of flexibly-furloughed employees therefore is the employee’s “usual hours” and determining this will depend on whether the employee has fixed or variable hours and pay:

• For employees with fixed hours, the employer takes the number of hours worked in the pay period before 19 March 2020.
• For employees with variable hours, the employer takes the higher of:
  • The average number of hours worked in the tax year 2019 to 2020; or
  • The corresponding calendar period in the tax year 2019 to 2020.

Records of all CJRS claims and calculations must be kept by an employer for at least six years and should include:

• Amounts claimed, calculations used and the claim periods
• Claim reference number
• “Usual hours” worked by employees who have been flexibly furloughed (together with calculations used)
• Actual hours worked/furloughed by flexibly furloughed employees.

Actions for employers

Now that the Government is beginning to ease restrictions for many businesses, employers will be considering their resourcing requirements. Where they intend to make use of the Flexible Furlough Scheme, they should note the following action points:

• Assess the appropriate flexible arrangement; will employees be furloughed on a rota basis such as week on, week off or will employees be furloughed part of the week and work the remainder, or perhaps work a reduced number of hours every day, or a combination of all options?
• Discuss the proposed arrangements with employees and obtain agreement. New furlough agreements will need to be drawn up to reflect any new, flexible arrangements.
• Where employees are being brought back from furlough, whether fully or partially, ensure timely communication and guidance about COVID-secure working practices to allay any concerns about COVID-19 risks in the workplace.