The Furlough Scheme – Update from 1 July 2020

6 July 2020

The government has announced that the Coronavirus Job Retention Scheme will come to an end on 31 October 2020. Between 1 July and 31 October, the Scheme will change significantly and will be gradually phased out.

From 1 July, furloughed employees will be allowed to work part-time while still remaining furloughed. Employers will be responsible for paying their wages for periods of time that they actually work. The government will continue to make payments in relation to any part of their normal hours that a furloughed employee has not worked.

The scheme is now closed to new entrants (from 30 June 2020). This means that, from 1 July, employers will only be able to claim payment from the government in respect of employees who have been furloughed for a minimum period of three weeks before 30 June. Any three week period between 1 March and 30 June 2020 will do.

This means that to be eligible for the new flexible furloughing scheme, an employee who has not previously been furloughed must have been placed on furlough from 10 June at the latest. The purpose of this is to ensure that the employer cannot claim for more employees than the number for which it was claiming up to 30 June.

Although the government will continue for the time being to pay 80% of wages up to a cap of £2,500.00 as well as employer’s National Insurance and pension contributions without employers being required to pay anything, that will come to an end on 31 July 2020. After that, the payments will taper as follows:

August: the government will pay 80% of wages up to a cap of £2,500.00 as before but employers will have to pay employer’s National Insurance contributions and pension contributions.

September: the government will only pay 70% of wages up to a cap of £2,187.50. Employers will have to pay employer’s National Insurance contributions, pension contributions and 10% of wages, to make up the 80% (up to the cap of £2,500.00).

October: the government will pay only 60% of wages up to a cap of £1,875.00. Employers will pay employer’s National Insurance contributions, pension contributions and 20% of wages to make up the 80% total (again, up to the cap of £2,500.00).

Flexible Working

From 1 July, employers will be able to agree a part-time working arrangement with employees. If the employer agrees with the employee to put them onto part-time work, the employer must keep a copy of that agreement for at least five years and record the hours actually worked. The employer can agree a flexible working regime with the employee more than once. The employer will only, however, be able to enter into such part-time working arrangements with employees who have previously been furloughed.

From 1 July, the minimum period for which an employer can make a claim is seven calendar days.

There is no doubt that the furlough scheme has been one of the government’s key weapons in preventing economic disaster and mass unemployment. It has, however, come at an enormous financial cost and it is no surprise that it is being phased out. There can be no doubt that the ending of the furlough scheme will result in substantial redundancies, despite the gradual and ongoing lifting of lockdown restrictions. Even if there are not further substantial spikes in cases, necessitating further lockdowns, there is no doubt that the short and medium term damage done to the economy will result in a substantial rise in unemployment.

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