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Furlough Leave: update and actions employers need to take
- AuthorSarah Whitemore
Update: On 3rd March 2021, Rishi Sunak announced in his Budget that furlough leave would now be extended until the end of September 2021.
On 31 October, it was announced that the Coronavirus Job Retention Scheme would be extended until the end of March 2021. You can find out more about the extension in our latest Updated Coronavirus Job Retention Scheme Guidance article.
After several months of employers utilising the furlough leave initiative launched in March 2020, on Friday 29th May Chancellor Rishi Sunak announced reforms to the Coronavirus Job Retention Scheme. While there will be confirmations to follow shortly, Sarah Whitemore, Employment Law Partner, here reviews the key points from the press briefing delivered on Friday, and details the steps that employers should start to take now.
Furlough Leave changes
There were several changes made to the furlough leave initiative, including:
- 10 June will be the last day that employers can place their employees on furlough leave.
- From 1 July, 'flexible furlough' is being introduced. Employees will be able to work part-time and be furloughed part-time, with employers deciding how the time will split.
- From 1 August, employers will be required to pay employee's National Insurance and pension contributions, and can no longer reclaim them through the CJRS.
- From 1 September, the Government will only reimburse 70% of salary (up to a maximum of £2,190). Employers must then top-up to 80% (or more, depending on the agreement between the employer and the employee).
- From 1 October, the Government will only reimburse 60% of salary (up to a maximum of £1,875), and employers will continue having to top up to 80% (or more).
- The furlough scheme will then close on 31 October 2020.
- The self-employed grant is being extended, with applications opening in August for a second and final grant. This will run in conjunctions with the reducing furlough scheme, paying 70% (not 80%) of average earnings up to £6,750.
What steps should employers take in light of these furlough leave changes?
“The most pressing change to arise from the briefing is that the 10th June is the last date an employer can place an employee on furlough leave,” explains Sarah. “In addition to this, from 1 July, employers will only be able to furlough someone who has already had a 3 week period of furlough before 30 June. You therefore need to review your list of non-furloughed staff and decide whether there are any that you may want to furlough at a later stage, because you may need to furlough them now and bring back someone to cover them so that you are able to furlough them later if you want to.”
Other actions you should be taking include:
- You should review the position of anyone who is currently on maternity leave or other long term absence and may return to work at a point when you may want to furlough them. If they have not already been on furlough leave you should consider placing them on it now to enable you to do so again at the point at which they would return to work.
- To be included in future furlough leave periods, employees have to have been on furlough before 10 June, so decisions need to be taken in the next week to maximise your position.
- From 01 July, employees can work during a period of furlough leave, under the following conditions:
- You will have to pay them in full without accessing the grant for any period in which they are working.
- Claims will only be able to be made on a week by week basis.
- You won’t be able to claim for part weeks and you will not be able to have overlapping claims periods or backdated claims periods.
- You may want to review now whether there are people that you would want to put on part time furlough leave because they will need to have served a three week period of furlough leave under the existing arrangement. You might need to place them on furlough now in order to use the part time arrangement from July onwards.
- From 01 July, employers will start to pay towards the pay for furlough leave, under the following conditions:
- It is very low to start with; just national insurance and pension contributions for the first month which the Chancellor estimates on average will be about 5%.
- From September employers will contribute 10% and from October 20% and during those months the maximum monthly grant payment will reduce to 70% and 60% respectively with the cap falling commensurately.
- Now is the time to consider whether you want to pay for furlough leave staff or whether there are any that you don’t anticipate bringing back for one reason or another and therefore whether you ought to be taking them through an appropriate procedure now while you can dismiss then with the maximum contribution from the government to their notice and holiday pay.
- You may need again to think about whether you force people to take holiday during furlough leave and if so whether you do that now/July/August while the majority of their pay would come from the government grant.
- You can’t have any more people on furlough in July to October than the maximum number you had on furlough at any point prior to 30 June. So query whether you may want to maximise (if you haven’t already done so) the number of people on furlough in the next three weeks.
“The Coronavirus Job Retention Scheme has seen the most significant financial support scheme the Government has offered in our lifetime and has been the source of much discussion since it’s launch,” concludes Sarah. “We have been supporting employers with their questions on furlough leave as well as other issues such as redundancies, returning to work and sickness absence during the coronavirus pandemic through our Peace of Mind package, which has allowed our members unlimited access to advice during recent months. It is vital that employers receive the right legal advice during this time, not only for their own security against future potential claims, but also for the wellbeing of their employees.”
You can contact Sarah or a member of the Employment Law team on 023 8071 7717 or email firstname.lastname@example.org to have your questions on furlough leave answered, or to find out how Peace of Mind could help your business. Alternatively you may find the following articles of use:
- What should I pay my furloughed employees who have just returned from maternity or paternity leave?
- Can my apprentices continue to learn while on furlough leave?
- What is Furloughed Leave and how does it work?
To receive regular Employment Law updates from the team regarding recent tribunal cases and legislation updates, you can subscribe to our weekly Employment Law Newsletter by completing our subscription form or emailing us at email@example.com.
This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice. All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.