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Changes to furlough: Closure to new entrants, employer contributions and ‘flexible furlough’

02 June 2020

The Chancellor announced on 29 May anticipated changes to the furlough scheme which we have summarised below. Further guidance is expected on or before 12 June and at present some points remain unclear.

Closure to new entrants

The furlough scheme will close to new entrants from 1 July meaning only employees who have already been furloughed for the minimum period of three weeks will be eligible to be furloughed after the end of June. This means that any employee who has not already been furloughed must be furloughed on or before 10 June so that they have completed 3 weeks on furlough by 1 July. The government has confirmed that employers will have until 31 July to submit their claims relating to the period to 30 June but furlough arrangements with individual employees must be in place sooner.

Employer contributions

The Scheme will remain open until the end of October. Employees will continue to be paid at current furlough rates (i.e. 80% of salaries capped at £2500 per month) but from 1 August, employers will be required contribute to the cost:

  • No employer contributions will be required in June and July; the government will continue to cover 80% of furloughed employees’ salaries up to £2,500 plus National Insurance and employer pension contributions for these months.
  • In August employers will have to pay employer National Insurance and employer pension contributions. This amounts to around 5% of the total cost of furloughed employees.
  • In September employers will also have to contribute 10% of the cost of furloughed employees’ salaries , with the government covering 70%.
  • In October employer contributions to the salary cost will rise to 20% with the government covering 60%.
  • The scheme will close on 31st October.

Flexible Furlough

From 1 July ‘flexible furlough’ will be introduced. Employers will be able to agree with furloughed workers a return to work on a flexible basis:

  • Employers will be required to pay employees’ salaries at their contractual rate of pay for days worked and will need to pay employer pension and National Insurance contributions in respect of these hours also. The scheme will continue to cover the cost of furlough days (with employers contributing as above).
  • To enable flexible furlough, the minimum reference period for claims under the scheme will be one week from 1 July (as opposed to three weeks). Employers will need to report the hours worked by employees in any furlough period and also the hours that employees would usually work. Employers should ensure that they can provide evidence if required of usual hours – this will be particularly important where hours typically vary.
  • Further guidance on flexible furloughing and how claims should be calculated is to be published by the government on 12 June.
  • Employers who currently claim under the scheme by reference to periods spanning two calendar months will no longer be able to do so from 1 July. Reference periods will need to be within calendar months. This is to enable the changes to be made to the scheme.

The government’s factsheet on the changes to the furlough scheme can be found here.

We will be providing further insight as soon as updates are announced.

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