Understanding flexible furlough...


On 1 July 2020, the furlough rules changed, enabling employers the chance to offer their staff a flexible furlough contract.

So, what does this mean for employers? This flexible approach to furlough means employers can choose to bring furloughed employees back to work for any amount of time and any work pattern they see fit.

And for employees? It means working part-time hours but on the same rate of pay, as arranged with the employer.

This provides a great way of gradually introducing staff members back into the workplace after potentially months of no work, therefore helping to ensure they are not overwhelmed by a full-time work schedule upon their return.

What’s more, employers will still be able to claim the furlough grant for the hours their flexibly furloughed employees do not work in that period. All in all, it provides an effective way to ease staff shortages, while still enabling financial support from the government.


1. How to flexi-furlough…


Flexible furlough is only available for employees that have successfully claimed a previous grant under the furlough scheme, and for staff who have previously been furloughed for at least 3 consecutive weeks at any time between 1 March and 30 June 2020.

In order to be eligible, the minimum 3-week period must have been completed by 30 June, while the last day an employee could have started furlough for the first time was 10 June.

  • You should have a discussion with employees who you wish to place on the flexible furlough scheme because you will need to agree the arrangements of their part time work.

  • The agreement should be confirmed in writing and you must keep a written record of the agreement for 5 years (see point 4. for more details on record keeping requirements)

You do not need to place each of your furloughed employees on flexible furlough. In addition, you can continue to fully furlough employees if you wish.

The period that you claim flexible furlough for must be for a minimum period of seven calendar days. Any flexible furlough period of less than this cannot be claimed for via the scheme.


2. Ready to submit your claim?


When claiming for employees who are flexibly furloughed, employers should submit the claim only when they are sure of the exact number of hours employees will have worked during the claim period. If an employer claims in advance and the employee actually ends up being furloughed for less hours than those claimed for, employers will have to pay the relevant amount back to HMRC.

For employees who are flexibly furloughed, employers need to work out each employee's usual hours and record the actual hours they work, as well as their furloughed hours, for each claim period. The way you calculate this will vary depending on whether the employee has fixed or variable hours.


3. Calculating hours of work and pay…


Each employee on flexi-furlough should be paid for the hours they work, in addition to National Insurance Contributions and pension contributions for those hours.

The scheme will allow you to recover the remainder of wages to a maximum cap. Wage caps are proportional to the hours an employee is furloughed.

From September 2020, the amount that the scheme will cover will begin to decrease, as shown below… but only hours not worked (that would have usually been worked) can be claimed for, so if your staff are under the flexible furlough scheme, the amount you can claim for them will be less than shown below:

  • July – 80% up to £2,500

  • August – 80% up to £2,500

  • September – 70% up to £2,187.50

  • October – 60% up to £1,875

For example, if an employee is back working part-time on the flexible furlough scheme, but working only 40% of their usual hours, they will be entitled to 60% of the £2,500 cap, as they are on furlough for 60% of their usual hours.


4. Fixed or variable hours? Working out usual hours for employees


There are two different calculations you can use to work out your employee’s usual hours, depending on whether they work fixed or variable hours.

You should work out usual hours for employees who work variable hours, if either:

  • your employee is not contracted to a fixed number of hours

  • your employee’s pay depends on the number of hours they work

Where the employee’s working hours are fixed, or their pay does not vary with the amount of hours worked, the reference period for calculating their hours is the hours your employee was contracted for at the end of the last pay period ending on or before 19 March 2020.

Where an employee works variable hours, you will use the higher of:

  • the average number of hours worked in the tax year 2019 to 2020

  • the corresponding calendar period in the tax year 2019 to 2020.


5. How will NICs and pension contributions change?


Employers will be responsible for paying all the National Insurance and pension contributions from August 2020, regardless of the employee being on flexible furlough. See below:

  • July – Government

  • August – Employer

  • September – Employer

  • October – Employer


6. Let’s talk about record keeping requirements


In addition to the current record keeping requirements under the previous furlough scheme, you will also need to keep a record of the following in regard to your flexible furloughed employees (government guidance specifies that this should be kept for a minimum of 5 years):

  • The number of hours the employees would usually work in the claim period,

  • The number of hours the employees have or will work in the claim period,

  • The number of hours the employees have or will be furloughed for in the claim period,

  • The written agreement regarding the flexible furlough hours, as set out under "legal requirements".

For example, you will need to record that an employee who normally works for 37 hours a week is actually working for 15 hours and is furloughed for 22 hours.


7. Working or training during furlough?


Like full-time furlough, during flexible furlough, employees are NOT allowed to do any work for you (or any associated organisation for that matter) during the periods that you record them as being on furlough.

That said, employees on flexible furlough are allowed to complete training during the hours that they are recorded as being on furlough but must be paid at least national minimum wage for those hours.


Furlough-proofing your business


To find out more about flexible furlough and how it may impact your business i.e. the benefits it brings as well as the complexities, why not register for our webinar Furlough-proofing your business.

Hosted by Amanda Chadwick, the webinar includes answers to common concerns and pressing questions to help ensure you have all the facts you need to put your mind at ease. Click here to find out more and register for Furlough-proofing your business.


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