Flexible Furlough

Flexible Furlough – Coronavirus Job Retention Scheme Update

On Friday 12th June HMRC updated the guidance relating to how the new “Flexible Furlough” Scheme will operate, as of the 1st July 2020.

As of the 1st July 2020, employers are able to bring staff who have previously been furloughed back to work, for any amount of time and any work pattern, while still being able to claim the grant for the hours they haven’t worked.

To be eligible for the flexible furlough the employee in question must have been placed on furlough for 3 consecutive weeks between the 1 March 2020, and the 30th June 2020. The last time an employee could have commenced furlough for the first time, would be 10th June 2020. * This may differ if the employee is returning from statutory parental leave.

What you need to do now

  • read the guidance to see how changes to the scheme impact you
  • book onto our weekly webinar – every Tuesday at 10am, you can send in any questions you may have before hand, or during the live session. We hold this in conjunction with Westcountry HR, who can answer any HR matters at the same time.
  • consider which employees you want to keep on full-time furlough and which employees will come back to work – on what hours – to agree arrangements with them as needed for your business, equality and discrimination laws will apply in the usual way.

When considering this bear in mind the contributions changes from the 1st August: –

Government contribution: employer NICs and pension contributionsYesNoNoNo
Government contribution: wages80% up to £2,50080% up to £2,50070% up to £2,187.5060% up to £1,875
Employer contribution: employer NICs and pension contributionsNoYesYesYes
Employer contribution: wages10% up to £312.5020% up to £625
Employee receives80% up to £2,500 per month80% up to £2,500 per month80% up to £2,500 per month80% up to £2,500 per month
  • confirm to your employee in writing that they will continue to be full time furloughed, or you will be bringing them back on a flexible furlough basis (this needs to be retained for five years). The employee does not need to provide a written response
  • keep a written record of how many hours your employees work, and the number for which they are furloughed – if you would like to know more about time sheet solutions we can assist you with, please do ask.
  • where an employee commenced a 3 week furlough period prior to the 30th June, they must be furloughed for the 3 consecutive weeks, prior to being able to be placed on a flexible furlough arrangement.

What you need to do from July

  • start your flexible furloughing of employees from 1‌‌ July onward. You can decide the hours and shift patterns they work to suit the needs of your business – you’ll pay their wages for the time they’re in work and can apply for a job retention scheme grant to cover any of their usual hours they are still furloughed for. You can still keep employees on full furlough if you need to
  • claim for periods ending on or before 30‌‌ June, by 31‌‌ J‌ul‌y – this is the last date you can make those claims
  • claim for further furlough periods as needed – the first time you will be able to make a claim for days in July will be 1‌‌ July.
  • Ensure that during the hours recorded as furlough the employee does not undertake any work that makes money for you as an employer, or provides a service for you as an employer.

They can take part in training, volunteer for another employer, or work for another employer (if contractually allowed).

  • Complete monthly claims

A Flexible Furlough Example Calculation:

Please see below an example of how flexible furlough will be calculated:

Employee has worked for F Ltd since 2016, working 40 hours a week for a monthly salary of £3,000, paid calendar monthly. The employee was furloughed on 25 April 2020 and from 1 July 2020 is asked to return to work half-days. Pay has not been topped up and there is no bonus, commission or other additional pay.

As they prepare to pay employees for the end of July, F Ltd also calculate their CJRS claim.

As F Ltd processes payroll on a calendar month it decides to claim for 1 to 31 July.

The employee is flexibly furloughed from 1 July, so F Ltd works out the usual hours. The employee has fixed hours and a salary that doesn’t vary by the number of hours worked so the calculation is:

  1. The number of hours the employee was contracted for at the end of the last pay period ending on or before 19 March 2020. This was 40 hours per week.
  2. Divide by the number of calendar days in the repeating working pattern. It is a weekly pattern, so divide by 7
  3. Multiply by the number of days in the pay period. 31 days in July, so multiply by 31.
  4. Result is 177.14, rounded up to 178.

Next F Ltd calculates the number of working hours and furloughed hours. The employee will work 23 half days, each of 4 hours, so working hours are 92. Furlough hours are calculated as:

  1. Number of usual hours, 178
  2. Subtract the number of actual hours worked, so subtract 92 = 86 furlough hours.

F Ltd calculates the maximum wage amount. As F Ltd will claim for the pay period which is a whole month, the maximum wage amount is £2,500.

F Ltd then works out the 80% of the usual wage.

The employee is furloughed throughout July so there are 31 furlough days.

The employee is on fixed pay, so the calculation is:

  1. Start with the employee’s wages from their last pay period before 19 March, £3,000. Claim is for a full pay period so skip to step 4.
  2. Skip
  3. Skip
  4. Multiply by 80% = £2,400.

Furlough pay for flexibly furloughed employee is the lesser of either:

  • 80% of usual wages – £2,400
  • the maximum wage amount – £2,500
  1. Here F Ltd uses £2,400.
  2. Multiply by employee’s furloughed hours, 86
  3. Divide by the employee’s usual hours, 178 = £1,159.55.

As the claim is for July, F Ltd can claim a wage grant for the whole amount of the minimum furlough pay.

“Usual” Hours

You will see in the above calculation that HMRC refer to “usual hours” , to calculate this we will need to know what hours each employee is contracted to, and what their working pattern is e.g. 4 days on then 4 days off would be an 8 day working pattern.

Please see some examples below for employee’s who work fixed weekly hours, and variable weekly hours, and how their “usual hours” would be calculated:-

Example of how to work out usual hours for employees who are contracted for a fixed number of hours

An employee is contracted to work on a shift pattern of four consecutive 12-hour days and then have four days off. This working pattern repeats every 8 days. The employee is paid calendar monthly. The employer looks to make a flexible furlough claim for the period 1 July 2020 to 31 July 2020 (31 calendar days). The pay period and the claim period align.

The employer calculates the usual hours for the July pay period by following the steps above:

  1. Start with 48 hours (the hours your employee was contracted for in their repeating working pattern at the end of the last pay period ending on or before 19 March 2020 – which in this example, is 12 hours multiplied by 4 days)
  2. Divide by 8 (the number of days in the repeating working pattern, including non-working days)
  3. Multiply by 31 (the number of calendar days in the pay period (or partial pay period) the employer is claiming for) = 186
  4. The outcome of step 3 is a whole number, so does not need to be rounded up to the next whole number

Example of how to work out the average number of hours worked in the tax year 2019 to 2020 for an employee who works variable hours

An employee started work for an employer in 2005. The employee is paid every two weeks and was furloughed on 23 March 2020.

The employer calculates that the employee worked 1,850 hours between 6 April 2019 and 22 March 2020. This includes any hours that the employee received holiday pay for.

The employee will be paid for the pay period 1 July 2020 to 14 July 2020, and the employer is looking to make a flexible furlough claim for the same period (1 July 2020 to 14 July 2020).

The employer works out the average number of hours worked in the tax year 2019 to 2020 as follows:

  1. Start with 1850 (the number of hours worked (including paid leave) in the tax year 2019 to 2020 before the employee was furloughed)
  2. Divide by 352 (the number of calendar days the employee was employed by the employer in the tax year 2019 to 2020, up until the day before they were furloughed)
  3. Multiply by 14 (the number of calendar days in the pay period (or partial pay period) which the employer is claiming for) = 73.58
  4. Round up to the next whole number because the outcome isn’t a whole number = 74

The employer will also need to work out the usual hours based on the corresponding calendar period in the tax year 2019 to 2020, and use the higher figure for the usual hours.

As you can see there is going to be a lot of calculations to complete, especially in the first flexible furlough period, and we will send out emails requesting the information we will require soon.

For anyone doing their own furlough claims HMRC have provided 80 examples of calculations here.

Please contact us with any queries you may have.