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Covid-19: Furlough update!

4th June 2020

Covid-19: Furlough update!

On 29 May the Chancellor announced that the Coronavirus Job Retention Scheme (“the Scheme”) in its current form will end on 30 June 2020.

What has changed?

1. Flexible Furloughing

From 1 July 2020, employees who have previously been furloughed for the minimum three week period can return to work on a part time basis. Employers will be able to agree any new working arrangements with the furloughed employees and this must be agreed in writing.

Employers will be required to pay the employees for the worked hours but can claim under the Scheme for the hours the employee is not working based on their usual working hours.

Further details on this will be published by the Government on 12 June 2020.

2. Changes to contributions

The announcement also included changes to the contributions from the Government and the contributions required from employers in relation to the hours not worked by the employee under the Scheme as follows:

In June and July, the Scheme will continue to cover 80% of wages up to a cap of £2,500 as well as employer National Insurance contributions and pension contributions.

In August, the Scheme will cover 80% of wages up to a cap of £2,500 but employers will be required to pay the employer National Insurance contributions and pension contributions for the hours the employee does not work.

In September, the Scheme will cover 70% of wages up to a cap of £2,187.50 and the employer will be required to pay the employer National Insurance contributions, pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.

In October, the Scheme will cover 60% of wages up to a cap of £1,875 and the employer will be required to pay the employer National Insurance contributions, pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.

The cap will be proportional to the hours not worked where flexible furloughing is used from 1 July 2020.

What do employers need to consider now?

Taking into account the details of the announcement outlined above, we believe the two main points for employers to consider now are:

1. Deadline of 10 June 2020

As no new entrants will be permitted to the Scheme after 30 June 2020, an employee must have been furloughed for the first time on or before 10 June 2020, so that they can be furloughed for the requisite minimum three weeks under the current scheme, in order to be eligible for the new post 1 July scheme.

If you are reviewing your Company’s options over the coming months and you wish to be able to rely on the “flexible furloughing” arrangements coming into force from 1 July 2020, you will need to ensure the employees in question have been furloughed for the first time on or before 10 June 2020. Any new furlough arrangements will need to be agreed in writing with the affected employees.

2. Is a new furlough agreement required after 1 July?

As employees have been prohibited from working for their employer while on furlough, a properly drafted furlough agreement will currently prohibit employees from carrying out any work for the employer during their furlough period. It may therefore be necessary for the furlough agreement to be amended by a side letter, or for a fresh furlough agreement to be entered into, which permits the employee to work during furlough and deals with the circumstances in which the employer can require the employee to work.

Employee consent will be required to any variation of their furlough agreement and this will need to be obtained in advance of the changes taking effect to ensure that there has been a valid variation of contract.

The difficulty for employers at this stage is that the government has not yet announced the detail of the changes to the Scheme that will take effect from 1 July 2020. Once the full details of the Scheme from 1 July 2020 are known, employers will be able to fully assess what action should be taken.

If you would like to discuss any of the challenges outlined in this article in more detail please contact Emma Williams on 01384 327 226 or email emma.williams@higgsandsons.co.uk

If you have any other general queries or concerns that you feel we can assist with, please email supportingyou@higgsandsons.co.uk and somebody will get back to you as a matter of urgency.

 

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