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Changes to the furlough scheme announced

Nick Irvin, Assistant Manager, Employment Tax
15/06/2020
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So far the Coronavirus Job Retention Scheme (CJRS or ‘furlough scheme’) has helped one million employers across the UK furlough 8.4 million jobs.

On 29 May 2020, the Chancellor announced further changes to the furlough scheme with a number of key points that you should be aware of going forward.

Changes from 1 June 2020

The furlough scheme will be closed to new entrants from 30 June 2020. HMRC have clarified that this means to claim for an employee under the scheme from July, they must have completed three weeks’ furlough by 30 June 2020 so any employees that have not previously been furloughed for three consecutive weeks must have been furloughed by 10 June 2020 to be eligible for the scheme in July

ic_keyboard_arrow_right_black_24px31 July 2020 is the deadline for making any claims in periods to 30 June 2020.

Changes from 1 July 2020

The Chancellor has announced that from 1 July the scheme will transition to allow employers to have the option of bringing back their employees on a flexible or part-time basis while still claiming for some of their wages from the government.

However, the number of employees an employer can claim for in any claim period from July 2020 cannot exceed the maximum number they have claimed for in any previous claim under the current CJRS.

In July, for the period that the employee is working, the employer will be responsible for paying them their normal wages and associated employer National Insurance Contributions and pension contributions. For the period that they are not working, the government will continue to fund 80% of the wages (capped at £2,500 per month) and the associated employer National Insurance Contributions (NICs) and minimum employer pension contributions.

ic_keyboard_arrow_right_black_24px31 July 2020 is the deadline for making any claims in periods to 30 June 2020.

From 1 August 2020, employers will continue to be able to bring furloughed employees back to work, but the funding from the government will reduce.

  • August
    The government will continue to fund 80% of the wages (capped at £2,500 per month) for the periods where the employee is not working, but employers will be required to fund the associated employer NICs and employer pension contributions.
  • September
    The government will fund 70% of the wages (capped at £2,187.50 per month) for the periods where the employee is not working, but employers will be required to fund the additional 10%, as well as the employer NICs and employer pension contributions.
  • October
    The government will fund 60% of the wages (capped at £1,875 per month) for the periods where the employee is not working, but employers will be required to fund the additional 20%, as well as the employer NICs and employer pension contributions.

The scheme will end on 31 October 2020.

Usual working hours and furlough pay

From July to August, employers taking advantage of the flexible furlough option will need to work out employees’ usual hours and record the actual hours they work to calculate the furloughed hours for the claim period.

For those employees who work fixed hours, the usual working hours will be the number of contracted hours in the pay period on or before 19 March 2020.

For those employees who work variable hours, the ‘usual hours’ in this case will be calculated based on the higher of either:

  • the average number of hours worked in the tax year 2019 to 2020
  • the corresponding calendar period in the tax year 2019 to 2020.

This calculation can include overtime hours, as long as the overtime pay was non-discretionary.

To calculate the hours that employee is not working, employers should subtract the hours actually worked from the usual working hours. The percentage that the government will fund through the scheme will apply to this amount under the flexible scheme.

Key information on claims

As a result of the transition, there are two important deadlines to be aware of.

  1. Only employees who have been furloughed for at least three consecutive weeks before 30 June 2020 will be eligible to be furloughed from 1 July 2020. The only exception to this is those returning from parental leave.

  2. All claims for the period(s) up to 30 June will need to be made by 31 July 2020.

  3. Claim periods starting on or after 1 July must start and end within the same calendar month and must last at least seven days unless you’re claiming for the first few days or the last few days in a month and the employer has already claimed for the immediately preceding period.

  4. If possible the claim period should match the date the employer processes the payroll. All furloughed and flexibly furloughed employees must be included in the same claim as only one claim can be made per period and the claim periods cannot overlap.

  5. If you have flexibly furloughed employees, employers should only claim when there is certainty about the number of hours the employees are working during the claim period. If the employer claims in advance and the employee works for more hours than claimed, then the employer will have to pay some of the grant back to HMRC.

Amending claims

HMRC has promised that claims already submitted will be able to be amended in due course. If you have made errors in previous claims resulting in an over-payment of a grant, you can now adjust for this in your next claim. However, there is still no online facility to adjust for errors in previous claims that have led to an underpayment of a grant.

Amounts that can be claimed through the scheme while the employee is not working:

  Wages  Employer NICs   Employer pension contributions   Key actions 
June   Government will fund 80%, capped at £2,500 Government will fund amounts associated with claimable wages Government will fund minimum automatic enrolment amounts on claimable wages Employees who you wish to furlough from 1 July must have been furloughed for three consecutive weeks prior to 30 June. Identify those you wish to bring back part-time from 1 July and obtain employees' written agreement to the new terms. 
July 

Option to start phasing employees back to work. Claims will be more complex going forward - ensure you can record time worked and time not worked in order to make a claim.
To discuss any aspect of your claims process please get in touch with your Crowe contact.

August   Employer funded  Employer funded Adjust claims as you can no longer claim employer national insurance or pension contributions. 
September   Government will fund 70%, capped at £2,187.50* The proportion (and cap) for claimable wages costs reduces. 
October   Government will fund 60%, capped at £1,875* The furlough schemes end on 31 October 2020. 

* employer to fund the rest. 

For more information on what you need to action and by when of, contact Caroline Harwood or your usual Crowe contact. Read more on the furlough scheme  on the following web page: Support for employers during the COVID-19 pandemic.

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Caroline Harwood
Caroline Harwood
Partner, Head of Share Plans and Employment Tax
London