COVID-19: Flexible Furlough Scheme – Important new changes to the Coronavirus Job Retention Scheme - 15/06/20
Over the weekend the government released further details around the changes to the Coronavirus Job Retention Scheme (CJRS) that Rishi Sunak originally announced on 29 May.
Here’s a reminder below…
15th June 2020
Mark Neath See profile
Although framed as an extension to the current scheme there are, in fact, a number of important elements that business owners will need to consider as we continue to emerge out of lockdown. For the first time there will be a level of flexibility introduced to assist the transition period in getting employees back into the workplace, but the new scheme also gradually transitions away the governments’ share of the financial contribution.
The central premise will be the option to ‘flexibly furlough’ workers from 1 July, enabling companies to reintroduce their furloughed staff back into work on a part-time basis, dependent on the needs of the business. Critically, employees can remain furloughed for the time they are not at work and the employer continues to receive support from the government in connection with the cost of furlough.
It’s important to note that to be eligible for flexible furlough, employees must have had three weeks of furlough leave prior to 30 June 2020, so must have been put on furlough on or prior to 10 June 2020 and the maximum number of employees for whom flexible furlough is claimed cannot exceed the number on furlough at any one time under the current CJRS.
The first time you will be able to make claims for days in July will be 1 July, you cannot claim for periods in July before this point.
31 July is the last day that you can submit claims for periods ending on or before 30 June.
Whilst the furlough may become flexible, the calculation of the grant becomes significantly more complex than before. Under the original CJRS, the grant was based on monthly pay, and because employees were prohibited from working, that was straightforward. With flexible furlough, the calculation is based on the hours worked and those not worked compared to ‘usual’ hours. Detailed records of hours worked will need to be kept.
The changes announced are complex and we are working through the detail of the guidance notes and will be providing an in-depth analysis with worked examples shortly.
In the meantime, here are the links to the latest HMRC update dated 12 June.
In summary, Old Mill’s Head of Corporate Finance, Mark Neath, comments: ‘The original furlough scheme enabled many employers to switch-off probably their biggest fixed cost during the lockdown period when revenues fell away and this has undoubtedly saved many businesses from immediate collapse. As more businesses are able to return to operation, they need to bring their workforce back but, of course, the big unknown is how quickly demand and revenues will come back.
The flexibility of the revised job retention scheme, by allowing part-time working, effectively converts the workforce into a variable cost that can be matched to demand during the transition period. Clearly that will take some careful managing. Provided other policy measures facilitate the reopening of the rest of the economy before this scheme comes to its end, and stimulate sufficient demand, it might just work in keeping businesses afloat and people in jobs’.