Extended Furlough: Updated Guidance (10 November 2020)
The now familiar guides have been updated to reflect the extension of the Furlough Scheme (hereafter referred to as ‘Scheme’) to 31 March 2021. (See list of Guidance /Examples at the end of this commentary)
Whilst these updated furlough guides mirror the old versions in many ways, there are some differences, which are set out below. The updated guides build in the new key eligibility dates for employees to be furloughed and the reference dates for calculating employees ‘usual hours’ and ‘normal pay’ as confirmed in last week’s Policy Paper.
We have not repeated the details of how to calculate usual hours or normal pay or gone into the intricacies of the calculations. Unfortunately, there is no substitute to reading the Guidance and examples when you are preparing your claim. Helpfully the online calculator is now operational for extended furlough. If you cannot use the calculator, you will need to work out what you can claim manually, using the calculation guidance or by seeking professional advice from an accountant or tax adviser.
We have also set out below a broad overview of the Scheme and we have highlighted some key issues for businesses.
We have also updated our Template Letter which we have attached to this email.
There is no date yet for the publication of the further Treasury Direction which provides the legal basis for the Scheme and takes precedence over these guides.
We will continue to review the new guides and provide updates to our Members as appropriate.
BROAD OVERVIEW OF THE EXTENDED FURLOUGH SCHEME
The purpose of the Scheme differs to the Job Support Scheme (JSS) that was to protect ‘viable’ jobs. The Furlough Scheme is broader and is available to businesses that cannot maintain their workforce because operations have been affected by coronavirus (COVID-19).
The Scheme will remain open until 31 March 2021. From 1 November 2020 you can claim 80% of an employee’s usual salary for hours not worked up to a maximum of £2,500 per month (proportional to the hours not worked).
The Government will review the Scheme in January 2021 and it may be that the employer contribution will increase at that stage.
Eligible employees are those employed on 30 October 2020, as long as they are on a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020.
An employee can be furloughed from 1 November 2020 even if they were not previously furloughed.
It is important to note that if employees were eligible to be furloughed under the old Scheme (whether or not they were actually furloughed), the business must use the old method to calculate their usual hours and normal pay. The new reference dates are only for new employees employed between 20 March and 30 October 2020.
Businesses can claim for employees on any type of employment contract, including: full-time, part-time, agency, flexible or zero-hour contracts.
As under the old furlough scheme if an employee’s fixed term contract has not already expired, it can be extended or renewed. You can put the employee on furlough as long as they were employed by you on or before 30 October 2020. (You must have made a PAYE Real Time Information (RTI) submission to HMRC between 20 March 2020 and 30 October 2020, notifying a payment of earnings for that employee).
If the employee’s fixed term contract expired after 23 September, they can be re-employed and claimed for as long as the other relevant eligibility criteria are met.
The guide always provides that an employee can end her maternity leave early to enable her to be furloughed (with the businesses agreement), by giving at least 8 weeks’ notice of her return to work. The updated guide makes it clear that the business cannot agree to shorten that notice period and states ‘you will not be able to furlough them until the end of the 8 weeks.’
All employers with a UK bank account and UK PAYE schemes can claim the grant. You do not need to have used the Furlough Scheme before 30 October 2020 to claim for periods from 1 November 2020.
Employers can furlough employees for any amount of time and any work pattern and claim the grant for the hours not worked.
For periods from 1 November 2020, you will only need to pay for the cost of employer NICs and pension costs.
Employees cannot undertake any work during time that they are recorded as being on furlough. However, the employee can:
- take part in training (you must ensure they are paid at least NMW but grant in most cases should cover that, if not you will need to top it up)
- volunteer for another employer or organisation
- work for another employer (if contractually allowed)
The definition of pay and what payments are within scope and are not within scope has not changed and remains the same as it was under Furlough and Flexible Furlough.
1. In relation to Agreement the updated Guide states:
To be eligible for the grant, employers must have confirmed to their employee (or reached collective agreement with a trade union) in writing that they have been furloughed. You must:
- 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)
Unlike the Policy Paper issued last week, the Guides do not state that the Furlough agreement must include a term stating:
…‘ the terms of agreement should reflect the hours worked/not worked over period of agreement.’
Therefore, it is our view that an Agreement containing a flexibility provision, allowing for the hours worked to change to meet the business needs will be valid, provided that a separate record of the hours worked and hours not worked is maintained. Such a provision would also be valid in terms of employment law.
Alternatively, businesses could ask employees to agree a ‘variation of hours worked and not worked’ by way of a new appendix. In either case, it is vital that a record of the actual hours worked and not worked is maintained.
It is important to remember that if a business wants to avail of the ability to retrospectively place employees on furlough back to 1 November 2020, they must reach the agreement with the employee on or before this Friday 13 November 2020.
2. Unlike Flexi Furlough/Furlough up to 31 October 2020, there is no cap on the maximum number of employees that can be placed on furlough from 1 November.
There are new dates for any business involved in a TUPE transfer (albeit we think there is an error in those dates). If you need advice on this please contact the legal team.
3. In contrast to the position under the now suspended JSS, the furlough guides confirm that the grant monies can be used to pay statutory (and we think contractual) notice pay.
However, the guides state that the Government will review this approach, and the position will change for grant monies after 1 December 2020. Further guidance will be issued on this in late November 2020. We believe that the guidance will be changed so as not to permit the grant monies to be used to pay notice pay.
As we stated in our last commentary, if you are considering redundancies or are currently in a redundancy process, you should carefully consider if the extension of the Scheme impacts on your redundancy proposals. Businesses should remember that they must consider all ways, not only to avoid redundancy, but also to mitigate the effects of the redundancy. The Scheme obviously provides a mechanism to mitigate the effects of redundancy by allowing an employee to continue in employment. If your business decides not to use this extended Scheme it is important to document the basis for your decision.
4. The position on Holidays, Sickness & Training remains the same as it was under the old guidance.
As a reminder, employees can take Holiday whilst on furlough. If an employee is flexibly furloughed, then any hours taken as holiday during the claim period should be counted as furloughed hours rather than working hours.
However, employees should not be placed on furlough for a period simply because they are on holiday for that period.
Where holidays are taken during the furlough period, the Working Time Regulations (WTR) require holiday to be paid at the employee’s normal rate of pay. Therefore, if a furloughed employee takes holiday, they must receive their usual holiday pay in accordance with the Regulations.
Employers will be obliged to pay employees who are on holiday additional amounts over the grant, though will have the flexibility to restrict when leave can be taken if there is a business need and the correct notice is given. This applies for both the furlough period and the recovery period.
Furloughed employees continue to accrue leave in accordance with their employment contract. However, through the furlough agreement you can agree to vary the employee’s holiday entitlement, but this agreement cannot bring the employees entitlement to below 5.6 weeks of holiday.
In the Template letter we have allowed for you to agree to vary the amount of leave that accrues (perhaps pro rata to 80%), and also provided for the business to set the amount of holiday and when employees can take holiday on furlough. This is to avoid the situation of employees accruing but not taking any leave during the time they are furloughed and returning to work with leave. It is important that the issue of holidays is managed.
In relation to Sickness it is clear that furlough should not be used for short-term illness and self-isolation. If, however, businesses want to furlough employees for business reasons who are on long term sick, they can do so. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee.
If employees become sick while furloughed, they must receive at least the rate of SSP. However, it is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate. If the employee is kept on furlough during their sickness, the business can continue to claim the furlough grant.
5. Claims can be submitted from 11 November 2020. Employers can claim for periods ending on or before 31 October 2020 until the deadline on 30 November 2020. The key dates for submitting later claims are:
|Claim for furlough days in||Claim must be submitted by|
|November 2020||14 December 2020|
|December 2020||14 January 2021|
|January 2021||15 February 2021|
|February 2021||15 March 2021|
|March 2021||14 April 2021|
6. Names published
The guides also state: “From December 2020, HMRC will publish employer names for companies and Limited Liability Partnerships (LLPs), the company registration number of those who have made claims under the scheme for the month of December onwards.”
This maybe HMRC attempting to deter businesses who are ‘doing well’ from using the Scheme.