Coronavirus Job Retention Scheme (aka Furlough Scheme) version 2

As reported in our last weekly update, the Chancellor announced a couple of weeks ago the further extension to the Job Retention Scheme and the changes to scheme would apply from 1 July.  The detailed guidance on the changes to the scheme were released early on Saturday morning and can be found at HERE  

Although announced as an extension to the current scheme, the second version of the scheme is very different and is more complicated. The changes being introduced from 1 July and the guidance issued cover:

• the conditions for an entitlement to make a claim;
• the amount of the grant available and
• how the grant will be calculated.

The changes will apply regardless of whether the employee will be on ‘full’ or ‘flexible’ furlough.

It is important to note that claims under the existing scheme (which comes to an end on 30 June) need to be made by the 31 July at the latest.

Under the new scheme, the employer will have to contribute towards the costs of their employees’ remuneration to qualify but claims under the revised scheme will be more complicated than under the current scheme (see below re minimum furlough payment).  Employers will want to understand the changes to the scheme before deciding whether a claim is right for them, and whether including employees in the scheme will be the best option to support the business going forward.

Summary of the changes:

The ability to ‘flexibly furlough’ employees from 1 July, will allow employers to bring employees back to work on a part-time basis, dependent on business need. For the remainder of an employee’s usual working time not spent at work, they can continue to be furloughed and the employer can claim the grant towards the cost of furlough.

To take advantage of the added flexibility, the new scheme requires the employer to issue a new ‘flexible furloughing’ arrangement letterto the employees and keep track of each individual’s hours worked and hours of furlough.

Minimum level of pay 

Currently, the scheme allows employers to decide how much they pay their employees but caps their claim to the lower of the amount paid to the employee, £2,500 per month and 80% of their 2019/20 equivalent monthly earnings. From 1 July, employers are required to ensure the employee receives ‘minimum furlough pay’ for the hours furloughed. If the employee doesn’t receive minimum furlough pay, no claim can be made. Employers will need to ensure they accurately calculate minimum furlough pay, to ensure their claim is not retrospectively denied.

The calculation of minimum furlough pay is more complicated than the current scheme and the guidance provides step by step instructions with examples.  The calculation of minimum furlough pay introduces the concept of ‘usual hours’, which needs to be determined first, before the calculation of minimum furlough pay can be undertaken. Usual hours are loosely based on the methods of determining qualifying fixed and variable pay under the current scheme calculations and will be used to determine the amount of claim available.  As with the current scheme, there are different methods to determine usual hours depending on the type of work undertaken by the employee. Each type of work has its own calculation to arrive at usual hours, with the work types being:

• Employees with fixed hours;
• Employees with varying hours – this work type has two standalone calculations which are both required to be undertaken;
• Piece or task rate workers – identified using the NMW interpretation of a piece rate worker.

Employer contribution 

until 31 July, the amount of the grant available will continue to be 80% of wages capped at £2,500 along with support with pension and employer national insurance costs.  Thereafter, the employer contributions will be as follows:

• From 1 August, the employer will be responsible for employer national insurance or pension contributions;
• From 1 September, employers to contribute towards the employees furlough pay. For furlough hours during September, the employer will cover the costs of an eighth of the furlough pay;
• From 1 October, the employer contribution will rise to a quarter of the furlough pay costs for October.

As set out in earlier newsletters, the scheme is closed to new entrants, who have not had a qualifying 3-week period of furlough by 30 June, meaning they had to be furloughed by 10 June.  There is one exemption to this restriction that applies to those employees currently on statutory parental leave who return to work after 30 June.  This is because the employer has not had an opportunity to furlough these individuals for a 3 week period prior to 30 June.

Again the detailed guidance on the changes and the calculations can be found at HERE.

Our update on both these Government support schemes, together with links to the Government sites where full details can be found (which were updated over the weekend), found HERE.