Flexible Furlough Scheme

HMRC have released details of the flexible furlough scheme, which starts on 1 July 2020. 

16 June 2020

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Under the flexible furlough scheme, employees can work for some of the week and be furloughed for the rest, in proportions decided between employee and employer. This change brings additional complexity to the scheme, in particular in terms of calculating the amount of grant recoverable by the employers.

Below we have summarised the main changes which will take effect next month.

The flexible furlough scheme

As of 1 July, employers will be able to bring furloughed employees back to work for any amount of time and any work pattern, whilst still being able to claim the grant for the hours not worked.

There is an important caveat in that employers will only be able to make a claim for employees who have been previously furloughed for at least 3 consecutive weeks prior to 30 June. In practice, it means that the last day for putting new employees on furlough was 10 June.

In a nutshell, employers will be able to claim a pro rata’d amount of 80% of salary, based on the proportion of hours not worked out of normal working hours. The complexity of the calculations will ultimately depend on whether the employee is fully or flexibly furloughed, and whether they normally worked fixed or variable hours.

Employees on “full-time furlough"

If the employee is fully furloughed, the calculations will not change as such and the employer will only have to work out the maximum wage amount, based on the employee’s normal salary (i.e. 80% of the salary, up to a cap of £2,500).

Employees on “flexible furlough”

If the employee is flexibly furloughed, the employer will have to work out the employee’s usual hours, record the actual hours they work as well as their furloughed hours for each claim period.
There are two different calculations depending on whether an employee worked fixed or variable hours.

In order to calculate the normal working hours for those with fixed hours, employers simply have to take the number of hours worked in the pay period before 19 March 2020. To calculate the normal hours for those with variable pay, employers must calculate it based on the higher of (a) the average number of hours worked in the tax year 2019 to 2020 or (b) the corresponding calendar period in the tax year 2019 to 2020.

Once the employer established the actual and furloughed hours, they will be able to proceed with calculating the amount of grant available. This can be done via an online calculator which can be utilised in the majority of ordinary cases. At this stage, the calculator can also be used to work out what employers will be able to claim in the period between 1 and 31 July and, including the flexible furlough scenario.

HMRC also published examples of how to calculate employees’ wages, NI and pension contributions, as well as actual and furloughed hours worked.

The employer will have to pay wages for any hours worked. If the employee works 20% of their usual hours, the employer will have to pay 20% of the usual pay to the employee and the government will currently still provide a reimbursement 80% of the usual pay.

Future changes

Please note that from August, employers will no longer be able to claim a grant towards the employer’s NI and pension contributions.

Thereafter, in September and October the amount of grant available to employers will decrease to 70% (up to a cap of £2,187.50) and 60% of wages (up to a cap of £1,875) respectively. Employers will have to “top up” their employees’ salaries to 80 % or the cap (or more, depending on what has been previously agreed with the employee). These figures are however based on the assumption that an employee would be fully furloughed. If an employee is flexibly furloughed, then employers will only be able to recover a proportion of the 70% or 60% of wages, depending on the ratio of hours worked and furloughed.

This will bring additional complexity and some calculations may indeed become very confusing. We are hopeful that the online calculator will be updated accordingly, in order to streamline the process.

We would recommend that all employers ensure to familiarise themselves with the updated guidance.

If you require tailored advice in respect of the scheme, please get in touch with our employment team.


Partner, Head of Employment

Robert Holland


Andrew Wallace