New Treasury Direction on flexible furloughing

The Treasury Direction which sets out the legal framework for the changes to the furlough scheme which come into effect on 1 July 2020 was published on 26 June. This makes it clear that any employee on furlough from 1 July 2020 will be regarded as on ‘flexible furlough’, whether they are furloughed full time or part time.

We have amended our Q&As to reflect the provisions of this latest Treasury Direction.

Qualification for furlough scheme from 1 July 2020

From 1 July employers can only furlough those employees who have been previously furloughed for three weeks or more prior to 30 June The exception to this is those employees on maternity, shared parental, adoption, paternity or parental bereavement leave or military reservists on active duty all of whom left before 10 June and who returned after 10 June, provided that an RTI submission had been made in respect of them by 19 March 2020 and the employer had furloughed other employees.

Can employers part time furlough those who have been previously ‘fully’ furloughed but are now back at work?

The good news is that nowhere does the Treasury Direction make reference to ‘bringing back’ employees from ‘full’ furlough to ‘part time’ and so it would appear that despite HMRC’s constant reference to ‘bringing back’ employees to flexi furlough them in their guidance, employers can agree with a previously furloughed employee, who is now back at work, to now move onto part time ‘flexible’ furlough, subject to the restriction on numbers.

However, equally, if an employee had been furloughed for three weeks in for example May, has been brought back to work and has been working normally since then and the employer wants to fully furlough them again from 1 July then they can still do this. Alternatively, employers can opt to agree a part-time working arrangement with them.

The employer pays them for the hours they work, at their normal rate of pay, and then claims a grant from HMRC for the hours not worked. This is done by reference to the employee’s normal contractual hours and what percentage they have worked and is subject to the cap, which will be changing from September. Worked examples are given in HMRC’s new YouTube video.

Evidence of a flexible furlough arrangement

These provisions have not changed - there must be an agreement between the employer and the employee (or a collective agreement) entered into before the flexible furlough starts and it must be sent to the employee in writing (email is fine), setting out what has been agreed in relation to the hours to be worked under the flexible furlough (this can be no hours at all or can be some hours). The employee does not have to sign it for the employer to be eligible to claim the grant but, as before, if the employer does not get their signed agreement then the employee may allege that they have not agreed and claim unlawful deduction of wages for the balance of their salary.

A subtle change in language?

Many employers are now moving from furlough to redundancy and there is the tricky question of what rate to pay a furloughed employee who has been served notice. If their contractual notice exceeds statutory notice by at least a week then, by virtue of ERA1996, s. 87(4), employers can, technically, pay them the furlough rate for their notice. However this approach is potentially open to legal challenge perhaps implying a term into the furlough agreement that this is only for the purposes of them being on furlough and not for any other reason and the language of the Treasury Direction might now help an employee with this argument.

It now says that ‘integral to the purpose of the CJRS is that amounts paid to an employer pursuant to a CJRS claim are used by the employer to continue the employment of employees in respect of whom the CJRS claim is made whose employment activities have been adversely affected by the coronavirus disease or measures taken to prevent or limit its further transmission’. Therefore, employees may now start to allege that leaving them on furlough is contrary to the purpose of the CJRS if notice has been served.

Reference to measures taken to prevent the spread has been introduced, presumably to deal with situations where there are reduced numbers on shifts to allow for social distancing.

Restrictions on claim periods

From 1 July 2020 the minimum claim period is seven days, and this can be claimed 14 days ahead of the employer running payroll. However, this cannot straddle months because the scheme will now change month-to-month so that from August no employer NICs or pension can be claimed, from September the employer contributes 10% and for October, the employer contributes 20%.

This may cause problems at the end or beginning of a month when there may be periods of less than seven days and gives rise to the concept of an ‘orphan’ period under the scheme. This concept is slightly more complicated than it needs to be but essentially employers can claim for less than seven days if it is at the start of the month and they claimed for that same employee up to the end of the last claim period without a gap or it is at the end of a month and the employer is claiming for that employee the next month.