For a few weeks there have been numerous rumours about the changes that will be made to the furlough scheme and when it will end. On Friday evening, the Chancellor formally announced what these changes will be (click here for the government’s summary of the key changes and click here for a useful fact sheet produced by the Treasury about how it anticipates the scheme will work going forward).
The employer’s guidance on the furlough scheme (click here) has not yet been updated with the more finer details of the changes but as soon as it is, we will let you know. In the meantime, we have summarised what we do know below.
What are the changes?
The key changes are as follows:
- The end of the furlough scheme. As we know from the Chancellor’s announcement on 12 May, the furlough scheme backed by government funding will end at the end of October.
- Reduction of the grant provided through the scheme. From August the grant that can be claimed from the government towards the salaries of furloughed staff will taper off as follows:
From 1 August whilst employers will still be able to claim 80% of the salary of furloughed staff (subject to a cap of £2,500 per month), employers will no longer be able to claim the cost of employer’s NI contributions and pension contribution costs.
From 1 September the government will reduce the grant that can be claimed in respect of salary costs for furloughed staff to the maximum of 70% of salary only, with a cap of £2,187.50 per month.
From 1 October the government will reduce the grant that can be claimed in respect of salary costs for furloughed staff to the maximum of 60% of salary of salary only, with a cap of £1,875 per month.
However, at all times, all furloughed staff will be entitled to receive at least 80% of their usual salary. Employers will therefore be obliged to cover the difference between the grant claimed and 80% of their usual salary (where the employee has agreed to a pay cut whilst furloughed), or, where no agreement between the employer and staff has been made about a pay cut, 100% of their salary.
- Closure of the scheme to new entrants. The scheme will close to new entrants on 30 June. What this means then is that from that date, employers will only be able to make use of the furlough scheme in respect of staff that have already been furloughed, at some point, by that date, for a full 3 week period. This therefore means that to allow time for staff to be furloughed for the required minimum 3 weeks, the last date that employers can furlough staff to ensure that they can benefit from the scheme is 10 June.
- Asking furloughed staff to work part time. From 1 July businesses will be able to bring furloughed staff back to work part time. Businesses will be able to decide how that will work in terms of the amount of time a staff member spends “furloughed” and the amount of time the staff member will be required to work (although employers will still have to act within the parameters of the employment contract), whilst still claiming a grant in respect of any unworked normal working hours.
This means that, for example, from 1 July where an employer asks a member of staff to work 50% of their normal working hours, the employer will be required to pay the full salary costs associated with the hours worked, but it can then claim a grant of up to 80% of the salary costs (subject to the tapering and maximum amounts set out above) in respect of the unworked normal working hours.
Employers will need to agree the part time furlough and working pattern with affected staff members and confirm this in writing.
What should employers do now?
- If you intend to make use of the furlough scheme to assist with protecting the future viability of your business, if you have not already done so, you will need to ensure that you furlough staff for whom you want to claim the furlough grant by no later than 10 June and for at least 3 full weeks.
- You need to ensure that that you make a claim for the furlough grant in respect of any member of staff furloughed up to 30 June through the government’s furlough scheme portal (click here) by 31 July.
- You should start assessing your business needs and which staff are or will be furloughed by no later than 10 June and consider whether there is a need to bring furloughed staff back on a part time basis from July. Some staff may have been out of work since March and so this may be a useful way of easing them back into the workplace in line with any increase in business demand.
The government has stated that further guidance on flexible furloughing and how employers should calculate claims will be published by 12 June. Once this guidance is received, will let you know.
This summary guidance note reflects our interpretation of the guidance at the time of writing. It should not be seen as a substitute to full legal advice and we would always recommend taking advice on your specific circumstances.
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