In more detail
The Coronavirus Job Retention Scheme (CJRS) has been operational since late April 2020, potential coverage being backdated to 1 March 2020. Eligibility for a CJRS grant requires an employee to be furloughed (i.e. cease work). To date, employees had to be furloughed for a minimum three week continuous period. From 1 July 2020, employees can be furloughed part-time. For more information, including information on the tapering reduction of the CJRS grant between August and October, see United Kingdom: COVID-19 – Changes to furlough scheme announced.
Late on 12 June, the government published further guidance on the flexible furlough changes to the CJRS. It confirms what was previously announced. The first three items below are the main items of interest in relation to flexible furlough. The last two items relate to both the current CJRS as well as the flexible furlough CJRS.
1) Written agreement
The government created considerable confusion on whether full furlough arrangements to date have required employees’ express written consent. The confusion arose from multiple amendments to CJRS guidance and conflicting requirements in Treasury Directions. The issue concluded with a requirement for agreement, but this could be oral or via collective bargaining. If an oral agreement, the employer had to provide written confirmation of the agreement to the employee and retain this as a record.
Regrettably, the issue has resurrected for flexible furlough. Based on the new guidance, we think the safest course of action for any flexible furlough arrangement is to have individual written consent (unless the business is relying on a collective agreement with a union).
The guidance says:
“If you flexibly furlough employees, you’ll need to agree this with the employee (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement. You’ll need to:
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- make sure that the agreement is consistent with employment, equality and discrimination laws
- keep a written record of the agreement for five years
- keep records of how many hours your employees work and the number of hours they are furloughed (i.e. not working).”
It is possible that the government does not intend to change the current option of relying on verbal agreement coupled with written confirmation. However, the requirement for written agreement, on the face of it, is a requirement for written consent.
Leaving aside the scheme requirements, there is a practical reason why an employer would want written agreement – flexible furlough arrangements are more complicated than a complete cessation of work. So, having a detailed document and express consent will be helpful in avoiding disputes about the arrangements and pay entitlements.
2) Calculating flexible furlough pay
The CJRS pays up to 80% of the employee’s reference salary, subject to a cap of £2,500 a month (as well as employer minimum pension contributions and national insurance contributions), these amounts tapering down between August and October.
For flexible furlough arrangements, the CJRS 80% / monetary caps apply to the reference pay payable for the employee’s flexible furlough hours. This means you work out the 80% of reference pay (the last pay period to end before 19 March) and then reduce proportionately to the hours on furlough, subject as always to the monetary cap, reduced by the same proportion. The government has published worked examples.
3) Claims for June furlough days
Flexible furlough is only available for an employee who has previously been furloughed for at least three consecutive weeks taking place any time between 1 March and 30 June 2020 (unless they are returning to work from extended family related leave). This means that the last date on which furlough could commence for the first time was 10 June.
Assuming they meet that eligibility criterion, an employee could have been brought back to work from furlough at, say, the beginning of June for two weeks and then re-furloughed from 15 June, and the employer would still be entitled to a CJRS grant for their employment costs for periods of furlough from 1 July. However, in order to be able to claim for the June furlough days, the employee in this example must complete a full three-week period of full furlough before they could start flexible furlough arrangements.
Example 1:
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- Furloughed from April to May continuously.
- Brought back to work for 2 weeks, 1 to 14 June.
- Re-furloughed commencing 15 June.
- Would need to stay furloughed until 5 July inclusive in order to be able to claim for the June days of furlough.
- Could start a flexible furlough arrangement on Monday 6 July.
Example 2:
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- Furloughed from April to 14 June continuously.
- Brought back to work on 15 June and works remainder of the month.
- Could start a flexible furlough arrangement the day the scheme goes live, i.e. Wednesday 1 July.
4) Retention of written records
The CJRS guidance states that employers have to keep a written record of the furlough agreement for five years. But there is also general record-keeping guidance which says employers need to keep a copy of all records for six years. It doesn’t specifically list the furlough agreement but “all records” is obviously very broad. Accordingly, it is probably safest to err towards six years.
5) Underclaims
The guidance on “If you make an error when claiming” has been amended to deal with underclaimed amounts. The previous guidance suggested that employers could not retrospectively amend a CJRS claim to claim more. This will be welcome news for clients who, for example, may have decided not to claim for overtime or commission because of doubts about whether these types of payment could be included in CJRS reference salary. However, employers should note that if they do retrospectively seek to claim more, HMRC somewhat ominously say they will “conduct additional checks”.
