The government have announced further details on the extension to the furlough scheme for employers. This includes the eventual subsidies employers will need to pay, as well as a new part time “Flexible Furlough” scheme.
How the Furlough Scheme Will Work Going Forward
For June and July the furlough scheme will remain unchanged, but flexible furloughing will come into effect in July.
From August, the government grant provided through the job retention scheme will be slowly tapered, so that employers pay part of the money to staff instead of the government. From the end of October the scheme will stop completely.
- In June and July, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance (ER NICs) and pension contributions for the hours the employee doesn’t work – employers will have to pay employees for the hours they work
- in August, the government will continue to pay 80% of wages up to a cap of £2,500 but employers will pay ER NICs and pension contributions. In other words, the same figures will go through payroll but employers will only be able to reclaim the salary costs from the government, not pension and ER NIC.
- 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 pay ER NICs, pension contributions and 10% of wages to make up 80% of the total up to a cap of £2,500. In other words, the same figures (80%) will go through payroll but employers will only be able to reclaim 70% of salary costs from the government, and none of the pension and ER NIC.
- in October, the government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work – employers will pay ER NICs, pension contributions and 20% of wages to make up 80% of the total up to a cap of £2,500. In other words, the same figures (80%) will go through payroll but employers will only be able to reclaim 60% of salary costs from the government, and none of the pension and ER NIC.
For flexible furloughing, the cap on the furlough grant will be proportional to the hours not worked.
If you are a smaller employer, some or all of your employer NIC bills will be covered by the Employment Allowance, so you should not be significantly impacted by that part of the tapering of the government contribution.
Employers have expressed their issue with the current rules that workers can only be furloughed, or back at work, with no in-between or part time basis allowed. The government have reacted to that by introducing “Flexible Furlough” from 1st July.
From 1 July 2020, you’ll have the flexibility to bring previously furloughed employees back to work part-time – with the government continuing to pay 80% of wages for any of their normal hours they do not work up until the end of August.
You can decide the hours and shift patterns that your employees will work on their return and you will be responsible for paying their wages in full while working. This means that employees can work as much or as little as your business needs, with no minimum time that you can furlough staff for.
Any working hours arrangement that you agree with your employee must cover at least one week and be confirmed to the employee in writing. When claiming the CJRS grant for furloughed hours, you will need to report and claim for a minimum period of a week. You can choose to make claims for longer periods such as on monthly or two weekly cycles if you prefer. You will be required to submit data on the usual hours an employee would be expected to work in a claim period and actual hours worked.
If your employees are unable to return to work, or you do not have work for them to do, they can remain on furlough and you can continue to claim the grant for their full hours under the existing rules.
So as an example, Jane works 5 days a week 7 hours a day at £10 per hour (35 hour week) She works a lot of overtime so her furlough payments have been based on her average monthly pay 2019-20. Her employer is charged £5 per week in Employer NI. She is not in a pension scheme.
She comes back from furlough on 1st July to work 3 days a week instead of 5.
Jane’s employer would be able to pay her gross 3 days x 7 hours x £10 = £210
Her employer would then be able to claim 2/5th of her previous furlough claim for her wages, and 2/5th of her Employer’s NI.
We realise that this is somewhat complex. We will be able to calculate this for all of our clients, but you will need to keep note of your staff’s contracted hours, and hours worked – even if they are on a monthly salary, in order for us to make the claim for you.
If any one has any questions please contact us and we will be happy to help.
Please find below a link to the new government website, which has more information