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Legal Comment: Employment Update - Changes To The Furlough Scheme

On Friday 29 May 2020, Chancellor Rishi Sunak announced reforms to the Coronavirus Job Retention Scheme (Scheme) which shall come into effect over the coming months.

 

Though we still await further details of the changes that will be made to the Scheme (the Treasury Direction and online Employer’s guidance are yet to be updated following the Chancellor’s announcement), the main headlines are:

 

– The Scheme will close to new entrants on 30 June 2020, which means that the last date that employers may place employees on furlough under the Scheme will be 10 June 2020 (on the basis that employees need to be placed on furlough for a minimum period of 3 weeks).

 

– From 1 July 2020, the Scheme will allow for ‘flexible furlough’, meaning that employees who have previously been furloughed will be able to work part-time and be furloughed part-time. Employers will need to determine how this will work in terms of how the employee’s time is divided. For employees on ‘flexible furlough’, employers will be able to claim under the Scheme for their normal hours which are not worked, but they will have to pay these employee’s in full for any hours worked, and will be responsible for tax and national insurance contributions in respect of those payments.

 

– In order to be eligible for a grant under the Scheme, employers will have to agree with their employees any new flexible furloughing arrangement, with the agreement then confirmed in writing.

 

– From 1 August 2020, employers will have to start paying employee’s national insurance contributions and pension contributions as they will no longer be reclaimable via the Scheme.

 

– From 1 September 2020, the government shall only reimburse employers 70% of salary (up to a maximum of £2,190) in respect of furloughed employees. From this point in time, employers will be required to top-up furlough employees’ salary to 80%, or more, depending on what is agreed between the employer and employee.

 

– From 1 October 2020, the government shall only reimburse employers 60% of salary (up to a maximum of £1,875). From then on, employers will be required to top up furloughed employees’ salary to 80%, or more, again subject to what has been agreed.

 

– The Scheme shall then close on 31 October 2020.

 

We understand that further guidance on ‘flexible furlough’ and how employers should calculate claims will be published on 12 June 2020.

 

Please stay tuned for our future updates as further details are released by the government. In the meantime if you’d like more advice on the topic, please contact a member of our Employment Law team

 

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