The CJRS: what's next

New guidance regarding the flexible furlough scheme was issued on the evening of 12 June 2020. The guidance is complex and not straightforward.

From 1 July 2020, it will be possible for employers to have furloughed employees work part time and still claim for hours not worked under the CJRS.

June 2020

• For June, there is no change to the CJRS; employers can claim 80% of wages for furloughed employees, capped at £2,500 a month.
• As of 10 June 2020, the CJRS closed to new entrants (but note there are some exceptions).
• Employers can also claim employer's NICs and employer's pension contributions (based on the minimum contribution under the auto-enrolment pension rules) under the CJRS.

July 2020

• 'Flexible' furlough begins (note that employers aren't compelled to use 'flexible' furlough and can still use 'full' furlough).
• The requirement to be on furlough for a minimum of three consecutive weeks is removed. There is no minimum period of furlough required.
• The employer is responsible for paying the employee for the hours worked at their normal rate of pay (plus the employer is responsible for employer's NICs and employer's pension contributions).
• 80% of wages, capped at £2,500 a month, can still be claimed but the grant amount and the monthly cap is reduced in proportion to the hours not worked.
• For hours not worked by furloughed employees, employers can also claim employer's NICs and employer's pension contributions (based on the minimum contribution under the auto-enrolment pension rules) under the CJRS.
• 31 July 2020 is the last date an employer can claim for the period to 30 June 2020.

August 2020

• 80% of wages, capped at £2,500 a month, can still be claimed but the grant amount and the monthly cap is reduced in proportion to the hours not worked.
• The employer is responsible for paying employer's NICs and employer's pension contributions for furloughed employees.

September 2020

• 70% of wages, capped at £2,187.50 a month, can be claimed but the grant amount and the monthly cap is reduced in proportion to the hours not worked.
• The employer is responsible for paying employer's NICs and employer's pension contributions for furloughed employees.
• The employer is responsible for paying 10% of furloughed employee's salary up to 80% i.e. £312.50.

October 2020

• 60% of wages, capped at £1,875 a month, can be claimed but the grant amount and the monthly cap is reduced in proportion to the hours not worked.
• The employer is responsible for paying employer's NICs and employer's pension contributions for furloughed employees.
• The employer is responsible for paying 20% of furloughed employee's salary up to 80% i.e. £625.

How will 'flexible' furlough work? 10 key points

1. Who is eligible?

• Only employees for whom the employer has successfully claimed under the CJRS between 1 March and 30 June.
• Employees must have been on furlough for at least 3 consecutive weeks before 30 June to be eligible under CJRS from 1 July onwards.
• An employee doesn't need to have been on furlough on 30 June to qualify.
• 10 June 2020 was the cut-off date for new entrants.
• Exceptions: employees on statutory parental leave (i.e. maternity, shared parental, paternity, parental bereavement leave, adoption leave) and returning after 10 June can be furloughed provided: (i) they started their period of statutory parental leave before 10 June; (ii) one employee employed by the employer was furloughed for 3 consecutive weeks before 30 June; and (iii) the returning employee was on the payroll before 19 March.
• No exception for, for example, those returning from long-term illness.

2. How does working impact the amount claimed under the CJRS?

• Employers are required to pay the employee's normal pay for hours worked when not on furlough.
• Hours worked will reduce the maximum amount the employer can claim for on a pro-rata basis.
• Can only claim for hours not worked (i.e. furlough hours).
• Complex calculation: employer must work out: (i) the 'usual' hours and (ii) then subtract the hours actually worked during the claim period.

3. How to calculate 'usual' hours

For those with fixed hours: usual contractual hours at the end of the last pay period on/before 19 March.

For those with variable hours: the higher of: (i) average number of hours worked in 2019/20 tax year or (ii) number of hours worked in the corresponding month/period in 2019/20 tax year.

Worked example: An employee is contracted to work 40 hours a week so their usual hours are 40 hours a week. The employer claims for the entire month of July under the CJRS. To work out daily hours, calculate 40/7. Then multiply this number by the number of days in the claim period (there are 31 days in July). Round up to the nearest whole number - here 177.14 is rounded up to 178. Therefore, the usual hours for July are 178.

4. How to calculate furlough pay for the purposes of flexible furlough

For an employee on full furlough, 80% of wages, capped at £2,500 a month.

For an employee on flexible furlough, the cap is a proportionate amount based on the number of furlough hours (i.e. hours when the employee is not working). To calculate the number of furlough hours, calculate the number of usual hours in the claim period and subtract the number of hours actually worked in that period.

Worked example: An employee's usual hours are 178. The employee works 92 hours in July. The number of furlough hours in July are therefore 86 (178 - 92). Calculate the fraction of furlough hours as against the number of usual hours (86/178) and apply it to £2,500 to calculate the maximum monthly amount that can be claimed under the CJRS. So, in this example, £1,207.87.

5. How does an employer place an employee on flexible furlough?

• The employer needs the employee's agreement and must confirm the arrangement in writing.
• The new guidance says a "new" written agreement is needed. It's not entirely clear if a letter amending an existing furlough agreement will comply or whether a completely new furlough agreement is required. The safest approach is to issue a new furlough agreement which sets out all the terms of flexible furlough.

6. Can an employer change the working arrangement during flexible furlough?

• Yes, no minimum furlough period is required from 1 July.
• The employer can enter into a flexible furlough arrangement with an employee more than once.
• However, it's likely to be administrative cumbersome as the employer would need to issue a "new" flexible furlough agreement each time and document the agreed flexible furlough arrangement.

7. What records must be kept?

• For five years: employers must keep a written record of the furlough agreement.
• For six years: employers must keep records of: (i) the number of actual hours an employee on flexible furlough has worked: (ii) the number of hours the employee is furloughed (i.e. hours the employee is not working); (iii) the amount claimed and the claim period for each employee; (iv) the claim reference number; (v) the calculations used when preparing claims; and (vi) the "usual" hours of those on flexible furlough (including the calculations used to reach the figures).
• Additionally, we suggest making a file note explaining any decisions taken in relation to furloughing employees.

8. Are there deadlines for submitting claims?

• Claims ending on/before 30 June 2020 must be submitted by 31 July 2020.
• There is no deadline yet for claims for periods that start on/after 1 July 2020 although we anticipate that the Government is likely to impose a deadline.
• Claims that span two separate months must be claimed separately e.g. days in June must be claimed separately from days in July.

9. How to claim and when?

• Claims continue to be made through the HMRC online portal.
• From 1 July 2020, the minimum claim period is one week.
• Claims must be made for the same calendar month.
• Only one claim per claim period can be made so the employer should claim for all furloughed employees in the claim period.
• In practice, if using flexible furlough, it's likely that the better approach will be to wait until as close as possible to the end of the claim period before submitting a claim so that the employer is certain of the actual hours worked.

10. Is there a maximum number of employees that an employer can claim for?

• Yes. From 1 July 2020, the maximum number of employees an employer can claim for in any claim period can't be more than the maximum number of employees claimed for in any claim period prior to 30 June 2020, e.g. if an employer claims for 20 employees in April, 40 employees in May and 30 employees in June, the employer can't claim for more than 40 employees after 1 July 2020.
• Therefore, employers should check the maximum number of employees they have claimed for in any claim period prior to 30 June.
• Also, if the employer is operating a practice of rotating furlough, if a previously furloughed employee starts a new period of furlough before 30 June, the employee will need to be furloughed for three consecutive weeks before they can start flexible furlough e.g. if a rotation starts on 22 June, the employee must remain on full furlough until 12 July and so 13 July is the first day that the employee can be placed on flexible furlough.

Planning issues: 10 things to consider

1. Decide whether you will continue to furlough employees after July and on what basis. Start preparing cost forecasts now, particularly for August, September and October when the employer will be required to pay under the furlough scheme.
2. Work out how many employees you need furloughed from 1 July 2020.
3. Check the maximum number of employees that you can claim for after 1 July 2020.
4. If employers intend to use flexible furlough from 1 July 2020, discuss and agree a working pattern with employees and confirm the arrangement in writing. It's safer to do this by way of issuing employees with a new flexible furlough agreement as opposed to a side letter amending an existing furlough agreement.
5. Will redundancies be necessary and, if so, when? There are likely to be several cliff-edges: 31 July and 31 October. Can you wait until the furlough schemes ends on 31 October to make redundancies or do you need to act sooner? If employers are making mass redundancies, remember that the collective redundancy consultation rules will apply and so they will need to undertake a mandatory period of consultation (30 days where 20 to 99 redundancies are proposed and 45 days where 100 or more redundancies are proposed) before you can make redundancies. For collective consultation to run during the CJRS and before it ends on 31 October, consultation will need to start by 15 September if 100 or more redundancies are proposed and by 1 October if 20 to 99 redundancies are proposed.
6. For employers keeping employees on full furlough, they should check existing agreements to see whether any further employee consent is required to extend the period of furlough.
7. For employers planning to use flexible furlough, they need to obtain employee consent and set out the agreed arrangements in a new flexible furlough agreement.
8. For employers using a furlough rotation system, ensure that anyone who has been previously furloughed and who starts a new period of furlough before 30 June is furloughed for three consecutive weeks before starting flexible furlough. For employers using new rotations from 1 July, they will need to enter into new flexible furlough agreements with employees.
9. For employers current topping-up the 80% subsidy, consider whether or not it's affordable to continue to do so, particularly as employers will be required to contribute under the CJRS from 1 August.
10. Can an employer keep employees on furlough after 31 October? We think it is possible to keep employees on furlough after 31 October, although the employer would not be able to claim the subsidy from the government as the CJRS ends on 31 October. The employer would need to obtain employee consent and issue a new furlough agreement in respect of the furlough period from 1 November. 

Simon Gorham, partner, Boodle Hatfield (sgorham@boodlehatfield.com)