Furlough Scheme changes were announced by the Chancellor, Rishi Sunak, on Friday afternoon. This was followed by an emailed update later that evening and, subsequently, a Factsheet was issued.
An extension to the Self-Employed Income Support Scheme (SEISS) – with changes – was also announced. We will cover this in a separate article.
Changes to the Furlough Scheme were a mixture of good news and not so good.
Good News – Flexible Furloughing
From 1 July, it will be possible to bring back an employee, previously furloughed, to work part time and claim furlough for the period they don’t work.
The example given is that of a furloughed worker who could return to work for two days and be paid normally while being furloughed for the other three days in a week and the employer receiving government support.
The example is based on a full-time worker. Where someone worked part time or with flexible hours the calculation will be based on “usual hours”. Quite how “usual hours” will be calculated isn’t known and further guidance will be issued in due course.
Flexible Furlough must be for a minimum period of one week. It can be longer, but can’t be less.
If operating the Flexible Furlough scheme employers must agree the new arrangement with employees and the agreement must be confirmed in writing.
Not so Good News – Number 1
The Furlough Scheme will close to new entrants from 30 June. Only employees which have been furloughed for at least 3 weeks prior to 30 June will be eligible for furlough going forward. This includes Flexible Furlough.
If an employer has workers who have not been furloughed and want to continue furloughing them after 30 June, they must furlough them before 10 June or they will be excluded.
Not so Good News – Number 2
Because of the changes, the claim process will be more complex.
- There will be a deadline of 31 July to make claims in respect of the period to 30 June
- From 1 July, claims can only be for full calendar months. Overlapping will not be allowed. Many employers calculate their pay to a different date than the end of a month. For example, we process payroll for employers with a cut off date of 25th of each month. This means that for June, we will need to calculate a full month plus the extra 6 days – and then do a more complex calculation thereafter. I can hear our payroll staff crying already!
- More information will be required on the claim form. Information about usual hours and hours actually worked will be required.
Tapering of the Furlough Grant
In July, the Furlough grant will still be 80% of usual wages plus NI (National Insurance) and Pension. This is subject to the comments above regarding Flexible Furlough and the shift in time.
From August, the scheme starts to change.
For August, the furlough claim will still be 80% of usual wages. However, the employer will need to pay the Employer NI and any Pension contribution. We aren’t sure how these will be calculated where an employer does not have a calendar monthly pay calculation period. It will be even more complex for employers operating weekly, fortnightly or four weekly pay.
Expect some difficult emails and telephone calls while we try to establish a calculation method for individual employers.
For September, there is a further reduction in government support. Employees will still be paid 80% of usual wages. However, in addition to the NI and Pension, the employer will pay a proportion of the furlough amount. The government will only refund 70% and the employer will need to make up the difference.
Bear in mind that these are payments to someone who is furloughed – that is not working and providing no economic benefit.
For October, the government contribution reduces even further to 60%.
From 1 November, there will be no support – unless something changes.
Many employers, possibly including you, will have difficult choices to make over the next few months. We hate to say this but, if you believe there will not be work for employees within the next few months, you may need to seriously consider redundancies or laying off employees. The cost of doing so during the furlough scheme means that a substantial part of the cost will be recoverable from the government – a situation which will not apply once the furlough grants are withdrawn.
The above covers the main points. There is more detail (and confusion) in the official releases and on the HMRC website. Further clarification and guidance will be published on 12 June and we will update you as soon as possible thereafter.
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Our existing clients will always come first but we understand that many businesses may be having difficulty contacting an adviser, so we will do our best to help.
If you haven’t already done so, you might find some of the articles on our website to be useful. Have a look.