16th June 2020

Legal Issues – Furlough Update (16 June)

As part of a recent trend of making changes at increasingly unusual times, HMRC announced after 9pm on Friday night some further details for the flexible furlough leave option that will be available from 1 July and how that will actually work in practice.   After a string of changes over the last 3 months, many are hoping that this is the last update and that the focus for businesses can shift to getting back to work and some sort of adjusted normal.

In very general terms, from 1 July employers will be able to have staff working part time while still on furlough leave and to claim 80% of salary for employees on a pro rata basis.  Calculations for those claims will be worked out using the number of hours not worked by an employee as a proportion of their normal working hours.

To calculate the normal working hours for those with fixed hours/pay, employers will simply take the number of hours worked in the pay period before 19 March 2020.

For those with variable pay, the calculation of normal working hours will involve employers taking the higher of (a) the average number of hours worked in the tax year 2019 to 2020 or (b) the corresponding calendar period in the tax year 2019 to 2020.

Contrary to earlier rumours, no minimum period of furlough is required and the 3 week requirement under the original scheme is consigned to the history bin for ever.

Employers are free to agree with their employees that they work any part of a day or week on any basis that suits them both and that would appear to be capable of being revised as regularly as needed.  Nothing in the guidance suggests that that there is any notice period required for such changes to be made although clearly employers will want to avoid too many changes at short notice for administrative and continuity purposes.

Similarly there is no detail provided telling employers how much of this has to be specifically agreed and recorded in writing with employees.  Earlier guidance made it clear that written notification should be sent out for placing employees on furlough leave in the first place (ideally with the employee confirming a response in writing) and it seems logical to send out further written terms to agree a move to flexible furlough.  Employers clearly need to keep records of the exact hours worked for the purpose of making a claim on the HMRC portal.

Early indications are that the process of using the adjusted HMRC calculator may be more complicated and time consuming than before and employers should at least be aware of that before making any decisions about how to deal with their workforce if flexible furlough is to be used.

If you have any questions on any of the issues mentioned in the above article, please contact Russell Eadie.

16th June 2020