COVID-19 Coronavirus Business Impact – Planning for the final months of the Coronavirus Job Retention Scheme

June 15, 2020

In this OnPoint we report on the further guidance on the Coronavirus Job Retention Scheme (the Scheme) issued by the Government on Friday 12 June, 2020 and the issues that employers need to consider in planning for the final months of the Scheme.


Following its announcement on 29 May, 2020 of the extension of the Scheme, the introduction from 1 July, 2020 of flexible furloughing and the increasing requirements over time on employers to fund furlough payments, the Government has now published further detailed guidance on how the Scheme will run until it ends on 31 October, 2020. We set out below the key points to note from the recent announcement and the guidance confirming its detail as well as some of the key practical and timing issues which employers who are utilising the Scheme will need to factor into their planning as they approach the end of its operation.

How to use the Scheme in the period until 1 July, 2020

With many more businesses being permitted to open from 15 June, 2020, employers using the Scheme may need to consider how they can use the Scheme in the period until 1 July, 2020 when flexible furloughing is permitted if they need to bring staff back off furlough.

During this period employers may continue to rotate staff on and off furlough. However, they cannot have employees working part-time on furlough and make claims for those employees under the Scheme – it is only possible for employees to be (fully) either on furlough or at work. It may therefore may be necessary to continue to rotate employees on and off furlough to work during the period up to 1 July, 2020 and then to take up the option of furloughing them on a part-time basis when that option becomes available from 1 July, 2020.

Revised Scheme arrangements from 1 July, 2020

The following changes are being made to the Scheme with effect from 1 July, 2020:

Furlough periods

There will be no minimum number of weeks or days for which an employee has to be furloughed.

Claim periods

31 July, 2020 is the last day by which claims can be submitted for periods of furlough ending on or before 30 June, 2020.

The period for which an employer makes a claim must be a minimum of seven calendar days – although a claim can be made for a period of fewer than seven days where the claim period includes either the first or last day of the calendar month and the period immediately before it has already been claimed for.

Claim periods must start and end within the same calendar month, reflecting the fact that the rules of the Scheme are changing each month during the remainder of its operation. Employers will only be able to make one claim in respect of each period and this claim will need to cover both fully and flexibly furloughed employees.

Eligible employees

An employer may only make a claim under the Scheme in respect of an employee if it has furloughed that employee previously for at least three consecutive weeks during the period from 1 March, 2020 to 30 June, 2020. The last date on which an employee could have been furloughed for the first time was 10 June, 2020. However, employees who are not on furlough as at 1 July, 2020 but who have been furloughed for a minimum of three consecutive weeks previously may be furloughed again after 1 July, 2020.

Limit on number of employees in respect of whom a claim can be made

The maximum number of employees an employer can claim for in any claim period starting from 1 July, 2020 cannot exceed the maximum number of employees that the employer has claimed for under any previous claim period under the Scheme ending by 30 June, 2020. This may be an issue if, for example, employers have been rotating only a proportion of their staff on and off furlough and now wish to have all or a greater number of staff furloughed on a flexible basis. This limit does not apply in respect of any employees returning from various types of statutory family leave after 10 June, 2020.


If a TUPE transfer occurs after 10 June, 2020, the transferee can furlough the transferring employees as long as the transferor has made a claim in respect of those employees in respect of at least three weeks’ furlough during the period prior to 30 June, 2020. These additional employees do not count towards the limit on the number of employees who can be furloughed referred to above. Specific rules deal in a similar way with changes in ownership under PAYE succession rules, consolidations of PAYE schemes within a group and transfers from a liquidator.


There will be a mechanism for correcting any errors which an employer makes when claiming under the Scheme. An employer will be able to report any overclaimed amount as part of its next claim, and the new claim will be reduced to reflect the amount overclaimed. An employer will also be able to apply for an additional amount if it has underclaimed. The Government is working on a process for repayment of overclaimed amounts where the employer is not proposing to make any further claims under the Scheme.

The increased costs of furlough

As we reported previously the Government grant for furlough arrangements will remain the same during July 2020. However, from August 2020 onwards employers will be required to contribute to the costs of their furlough arrangements on the following basis:


Government Contribution

Employer Contribution to
Furlough Grant

June and July 2020

80 percent of regular wages up to a cap of £2,500 plus employer NICs and minimum pension contributions


August 2020

80 percent of regular wages up to a cap of £2,500 

Employer NICs and minimum pension contributions

September 2020

70 percent of regular wages up to a cap of £2,187.50

10 percent of regular wages up to a cap of £312.50, plus employer NICs and pension contributions

October 2020

60 percent of regular wages up to a cap of £1,875

20 percent of regular wages up to a cap of £625, plus employer NICs and pension contributions

Employees who are furloughed 100 percent of the time will continue to receive 80 percent of regular wages up to the cap of £2,500, contributed by the Government and the employer as above. For employees on flexible furlough, the grant and cap will be reduced in proportion to the hours not worked. The calculations are complex and will need to be followed carefully. Employers may continue to top up the wages of furloughed employees to 100 percent if they wish.
These increased costs need to be taken into account by employers in determining whether and on what basis they can afford to continue to furlough staff, especially if they have continued to top up employees’ pay to 100 percent of normal pay. If an employer cannot or does not wish to make the contributions required under the Scheme, it will need to cease its furlough arrangements and consider what alternative restructuring actions are necessary, whether by way of redundancies or seeking to negotiate new terms and conditions of employment.
Flexible furloughing
From 1 July, 2020, “flexible furloughing” will also be permitted under the Scheme as long as the employee has been furloughed previously for at least three consecutive weeks in the period between 1 March and 30 June, 2020. It will not be possible to move an employee who has not been furloughed at all on to flexible furlough or to apply flexible furloughing to an employee who has not completed the minimum three weeks of furlough prior to 30 June, 2020. Flexible furloughing is not required so employers can continue to furlough employees fully and to rotate staff on and off furlough if that is preferable in terms of resourcing and costs.
By way of further detail:
  • Employers will be able to bring back to work employees who have previously been furloughed, for any amount of time and on any work pattern, while still being able to claim a grant under the Scheme for those of their usual hours not worked.
  • Flexible furlough agreements can last for any length of time and employees can enter into a flexible furlough agreement more than once.
  • Employers will need to agree flexible furlough arrangements with their employees (or reach collective agreement with a trade union). There is reference in the guidance to a “written agreement” for flexible furlough - this suggests that written agreement is required from the employee in contrast to the position in relation to furlough in full where all that is required is an employee's agreement and a written “record” of that agreement. The guidance also states that any flexible furlough agreement must be “consistent with employment, equality and discrimination laws.”
  • For any hours which an employee works during flexible furlough, employers will need to pay wages, tax and NICs in the usual way. Employers will be able to make a claim under the Scheme for the remainder of the employee’s “usual hours” that the individual is not required to work. They will be required to submit data on the usual hours the employee would be expected to work in the relevant period, the actual hours for which the employee worked and the number of furloughed hours in the relevant claim period.
  • Employers must keep detailed records of the number of hours an employee works and the number of hours for which they are furloughed not least for the purposes of any subsequent audit by HMRC. These must be retained for six years.
  • The new guidance does not address the holiday entitlements of those who are flexibly furloughed – holiday will continue to accrue and appropriate holiday pay paid in respect of any period of holiday taken.
Usual and unworked hours
A crucial issue for employers making claims in relation to flexible furloughing is what constitutes “usual hours”. The approach required under the Scheme mirrors how regular wages are calculated for salaried employees and those who receive variable pay and in broad summary:
  • The usual hours of salaried employees whose pay does not vary by hours worked will be based on the hours the employee was contracted for at the end of the last pay period ending on or before 19 March, 2020.
  • The usual hours of employees who work variable hours will be based on the higher of the average number of hours worked by the employee in the tax year 2019/2020 and in the corresponding calendar period in the tax year 2019/2020.
Overtime is also included as long as payment for that overtime was not discretionary i.e. where a contractual overtime rate applies.
The employee’s unworked hours will also need to be calculated as these are the hours for which a grant can be claimed under the Scheme. This will be calculated by deducting from the usual hours in the claim period the number of hours the employee actually worked in the claim period.
The determination of usual and unworked hours is not as straightforward as might be expected, not least as non-working days and leave are to be taken into account. HMRC has produced worked examples to assist employers in this process.
Extending and updating current furlough arrangements
Employers will need to review and update their original furlough letters if changes need to be made, for example, to extend furlough, to provide for “flexible furloughing” (as set out above) or to address arrangements for the “top up” of pay above the amounts payable under the Scheme if they can no longer be sustained. To the extent that this entails amendments to employees’ contracts consideration will need to be given to whether these can be dealt with consensually or might trigger collective redundancy consultation obligations.
Employees returning from family leave
On 9 June, 2020, the Government announced that employers who have previously used the Scheme will be able to furlough any employee who has been absent on statutory maternity, shared parental, adoption, paternity or parental bereavement leave and who returns to work after the cut off date for new entrants to the Scheme of 10 June, 2020. This is the case even if the employer is furloughing that employee for the first time. The employer will be able to make a claim under the Scheme in respect of such a returner from family leave provided that:
  • the employer has previously submitted a claim for another employee in relation to a furlough period of at least three consecutive weeks taking place any time between 1 March, 2020 and 30 June, 2020.
  • the employee whom the employer wishes to furlough for the first time started their leave before 10 June, 2020 and returns from that leave after 10 June, 2020.
  • the employee in question was on the employer’s PAYE payroll - with an RTI submission made to HMRC - on or before 19 March, 2020.
Employers who need to consider restructuring and redundancy exercises as a result of the increased cost of or towards the end of furlough will need to ensure they plan their restructuring exercises carefully and, where collective consultation may need to take place, be aware of the applicable timelines. Leaving aside time for election of representatives where necessary and potential additional time for individual redundancy consultation with affected employees:

  • 16 September, 2020 is the last date on which an employer which is proposing 100 or more redundancies at one establishment can start collective consultation to allow for the requisite 45 day minimum collective consultation before the end of the Scheme.
  • 1 October, 2020 is the last date on which an employer which is proposing between 20 and 99 redundancies at one establishment can start collective consultation to allow for the requisite 30 day minimum collective consultation before the end of the Scheme.
Government guidance materials
The guidance and other materials to which employers will need to refer when implementing furlough arrangements and making claims are as follows:
Key action points
As a result of these various developments employers need to:
  • address the introduction of flexible furlough as part of their resourcing planning and, if they wish to take advantage of this new flexibility, engage in appropriate discussions with staff or their representatives to agree and document the relevant arrangements.
  • ensure they put in place appropriate systems to record their flexible furlough arrangements, and the recording of hours actually worked by those on flexible furlough.
  • ensure that claims are made in accordance with the amended rules of the Scheme.
  • consider whether restructuring plans need to be put in place.
  • keep the situation under review in case additional guidance on the Scheme is issued and to identify if any further changes to the rules governing the Scheme are made when a further Treasury Direction is issued establishing the legal basis for the revised Scheme.

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