The Coronavirus Job Retention Scheme (CJRS) has provided a lifeline for many employees and employers during the COVID-19 pandemic. As at 21 June 2020, 9.2 million employees had been furloughed by 1.1 million employers who had, collectively, claimed grants totalling £22.9 billion.

Prior to 30 June 2020, employees who had been furloughed could not work for their employer while on furlough. This changes from 1 July 2020 with the introduction of flexible furloughing.

The CJRS runs until 31 October 2020. As the scheme draws to a close, the grant support provided to employers is gradually reduced from 1 August 2020.

Reduction in support

The CJRS enters its second and final phase from 1 July 2020. While employees will continue to receive 80% of their wages for furloughed hours up to the maximum amount for the duration of the scheme, the amount that employers can claim changes each month.

For July 2020, employers can still claim 80% of the furloughed employee’s wages up to £2,500 per month, plus the associated employer’s National Insurance due on the grant amount and the minimum employer pension contributions due under auto-enrolment. For pay periods commencing on or after 1 August 2020, the employer is no longer able to claim back employer’s National Insurance or pension contributions. For August, the grant claim remains at 80% of the employee’s pay up to £2,500 per month; however, this reduces to 70% for September up to £2,187.50 per month and to 60% for October up to £1,875 per month. For the last two months of the scheme, the employer must make up the difference so that the employee continues to receive 80% of their pay for furloughed hours up to the maximum amount.

Nature of flexible furloughing

Flexible furloughing enables employers to bring back furloughed workers for any amount of time and under any work pattern while continuing to claim a grant for the employee’s normal hours that they are not working. The employee’s normal hours are effectively split between hours that they work for which they are paid by the employer as normal and hours that they do not work – treated as furloughed hours – in respect of which the employer is able to claim a grant under the scheme.

From 1 July 2020, employers can only claim a grant for an employee if the employee had previously been furloughed for at least three consecutive weeks between 1 March 2020 and 30 June 2020. To meet this test, the latest date an employee could have been placed on furlough for the first time is 10 June 2020. However, this does not apply to employees returning from statutory leave (such as maternity, paternity or adoption leave) after this date who can be furloughed when their leave comes to an end.

Calculating the amount of the claim

The calculation of the claim amount under flexible furloughing can be complicated. However, detailed guidance is available, with examples, on the Gov.uk website.

The starting point is to determine the employee’s usual hours, the hours that the employee works and the furlough hours (which are simply the usual hours less the hours worked). The Government guidance explains how to work out an employee’s usual hours.

Having determined the furlough hours and the usual hours, the next step is to work out the minimum furlough pay. This is found as follows:

  1. Find the lesser of 80% of the employee’s usual wages and the maximum amount (equivalent to £2,500 per month).
  2. Divide this by the employee’s usual hours.
  3. Multiply this by the number of hours that the employee is furloughed in the pay period.

Example

In July 2020, an employee returns to work on flexible furlough. The employee’s usual hours are 155 hours and the employee works 56 hours in July, for which they are paid by their employer as normal. The remaining 99 hours are furlough hours for which the employee can claim a grant.

The employee’s usual pay is £3,000 per month; 80% of which is £2,400. As this is less than £2,500, this figure is used to calculate minimum furlough pay.

The minimum furlough pay is £2,400 x 99/155 = £1,532.90.

The employer can claim £1,532.90 for July plus the associated employer’s National Insurance and pension contributions.

Claims for August, September and October

The amount that the employer can claim for August is the minimum furlough pay, for September 70/80ths of the minimum furlough pay, and for October 60/80ths of the minimum furlough pay.

For pay periods on or after 1 July 2020, claims must start and end in the same calendar month. If the pay period spans two months, two separate claims must be made.

Help with claims

We can provide guidance on flexible furloughing and submit claims on your behalf.