Coronavirus: Chancellor announces further updates to furlough scheme

On Friday 28th May 2020 Chancellor Rishi Sunak made an announcement regarding changes to coronavirus furlough scheme. We have summarised the headline points below.

02 June 2020

Back to all news + events

1. The scheme will be closed to new entrants from 30 June
It has been confirmed that employers will only be able to furlough employees that have already been furloughed for a full three-week period prior to 30 June. In practical terms it means that the last day that employers can place new employees on furlough for the first time will be 10 June.

2. “Flexible furlough” is being introduced from 1 July
From 1 July employers can bring back to work employees that have previously been furloughed while still being able to claim the grant for their normal hours not worked. This effectively means that employees will be able to work part time and be furloughed part time. Employers will have to agree the new working arrangements with their employees.

Our understanding is that employers will have to pay their employees for worked hours, at the same time being able to claim the grant for furloughed hours (calculated by reference to the usual hours worked in a claim period). Further guidance on flexible furloughing and how employers should calculate claims is expected to be published on 12 June.

3. Changes to employers’ costs effective from 1 August
At this stage, employers can recover 80% of wages (up to a cap of £2,500) as well as their NI and pension contributions, however from August the level of grant will be slowly reduced.

As of 1 August, the government will continue to pay 80% of wages (up to a cap of £2,500) however the employers will not be able to recover their NI and pension contributions. This will continue until the scheme officially ends at the end of October.

In September, the government will pay 70% of wages (up to a cap of £2,187.50) for the hours the employee does not work. Employers will have to pay their NI and pension contributions. The government’s contribution will decrease to 60% of wages (up to a cap of £1,875) in October.

Please note that throughout September and October, the employer will be under an obligation to “top up” their employee’s salary to 80% or the cap (or more, depending on what has been previously agreed with the employee) in respect of the hours the employee does not work. If “flexible furlough” is utilised, then employers will also have to pay their employees for hours they actually worked during the relevant period.

4. Furlough Scheme will close on 31 October 2020
The scheme is not intended to be continued beyond October 2020. Please note that the updated Treasury Direction and the Employer’s Guidance are still awaited. As the purpose of these is to show how the Treasury and HMRC are intending to interpret the new changes, they may provide more clarity on the recent announcements.

If you have any queries regarding Furlough Scheme, or other employment law matters, please get in touch with our employment team.

Comment

Partner, Head of Employment

Robert Holland

Associate

Andrew Wallace