Flexible furloughing has come a month earlier than previously announced. From 1 July 2020, you will have the flexibility to bring previously furloughed employees back to work part-time.
The employer will pay the hours they work part time at 100% ensuring adherence to the new National Minimum Wage (NMW) threshold as at 1 April 2020. The government will continue to pay 80% of wages for any of their normal hours they do not work up until the end of August.
It is important to note that the current scheme will close for new entrants from 30 June 2020 and you will only be able to furlough employees that you have furloughed for a full 3 weeks prior to 30 June 2020. Therefore, if you do not already have employees on furlough they need to be on furlough for the first time by 10 June 2020 for at least a three week period that is completed by 30 June. The submission has to be made by 31 July 2020.
The new tapering rules 'timeline'
- June & July the government will pay 80% of wages up to a cap of £2,500, Employer NI and pension contributions (only for the hours the employee doesn’t work).
- In August the government will still pay 80% of wages up to a cap of £2,500 but you will NOT receive Employer NI and pension contributions. The employer will start to pay these costs.
- In September the government will pay 70% up to a cap of £2,187.50 but you will NOT receive Employer NI and pension contributions – The employer has to top the furlough element of 70% up to 80% to the cap of £2,500.
- In October the government will pay 60% up to a cap of £1,875 but you will NOT receive Employer NI and pension contributions – The employer has to top the furlough element of 60% up to 80% to the cap of £2,500.
In simple terms, the overall payment whilst on furlough (hours on furlough) must always equal 80% overall. This means staff could be on furlough for as little as an hour, as there is no more minimum period, and work the rest of the week/month. Where there is a mix of work and non-work, the wages cap for the month will be pro-rated, so if employees are working for 40% of the month 60% of the wages cap of £2,500 will apply. The number of employees in the claim for the 1 July 2020 cannot exceed the numbers in any claim prior to that date.
HMRC mentions that hours worked and hours not worked will need to be reported, therefore we presume that HMRC will require a breakdown of the element that is furlough and the element when working. Based on our understanding, each payment will have to be split out based on hours and the furlough claim will be calculated at 80% on the normal hours of work rather than the current ‘February’ salary or average over the past tax year. This is just our initial understanding and this could change once further formal guidance is issued by HMRC.
Below is our current understanding of how the calculations may look, with figures in blue being the cost to the employer, and figures in green being what we believe will be received through the CJRS. As you can see, the furlough figure always has to equal 80% overall and over the different months the employee still has to receive the same gross pay.
Guidance on the changes and how to calculate claims with the extra flexibility will be available by 12 June 2020, therefore the above example is based upon our current understanding and we will issue further guidance in due course.
Payroll and claiming furlough is becoming and ever more complicated matter and never has it been a better time to consider outsourcing this key business function. For more information please contact our Head of Payroll Hannah Dumenil on Hannah.firstname.lastname@example.org
or call 01268 983898.