Your questions answered on the latest update to the furlough scheme
With thousands of independent practitioners’ staff on furlough, Ian Tongue responds to the Chancellor’s latest revisions to the scheme made on 29 May.
Update to furlough scheme
The Chancellor recently announced changes to the Coronavirus Job Retention Scheme, or furlough scheme as many call it. These changes were muted previously but have been accelerated to 1 July, no doubt in response to the cost of the scheme escalating and more flexibility being required.
The following answers the key questions arising from the update.
Can I still apply for the scheme?
Yes but be quick! One of the key changes in the announcement was to close the scheme for new entrants from 30 June 2020.
However, our understanding is that the scheme requires your employee to have been furloughed for the current three-week minimum by 30 June and therefore the last date to furlough an employee for the first time is 10 June 2020.
Is the scheme ending soon?
Not yet, as it is has been extended to the end of October for those already using the scheme, provided that you have furloughed your employee(s) by the time scale above.
There will, however, be new rules on funding level and flexibility for the scheme from 1 July 2020.
Are the claim periods changing?
Yes, a deadline of 31 July 2020 for periods up to 30 June 2020 has been announced.
From 1 July, overlapping periods are not allowed and therefore it is anticipated that claims will be made on a monthly basis due to the fact the scheme funding changes monthly.
Can my employees now work for me?
Yes, this is a key change from 1 July 2020.
This is a welcome change, as the requirement for the employee to carry out no work for you was particularly restrictive. The scheme allows you to furlough an employee for the hours that they do not work and claim for those hours subject to the overall claim limits.
If you are currently using the method of furloughing for three weeks and working for one week, this is a more practical option to spread out the work and provide cover.
You will be responsible for the cost of the hours they work together with associated employers National Insurance and statutory minimum pension contributions.
Are there other changes that will affect me financially if I have furloughed workers?
Yes, at the same time as providing flexibility to the scheme allowing part-time working, the level of funding is being reduced in stages, meaning that employers will need to pay more.
Aside from changing the overall maximum percentage level that can be claimed, the additional grant for employers’ National Insurance (NI) and statutory minimum pension is being phased out from 1 August 2020.
The funding available is:
| Up to 31 July 2020 | – | No change, 80% of salary subject to a maximum of £2,500 per month. Employers NI and statutory minimum pension claimed in full. Employer to pay top up to normal salary unless agreed otherwise.
The above is restricted for any hours worked by the employee. |
| 1 August 2020 – 31 August 2020 | – | Maximum claim for the salary as above. However, employers will pay the cost of employers NI and statutory pension contributions for both hours worked and not worked. |
| 1 September 2020 – 30 September 2020 | – | Government will pay 70% of salary up to £2,187.50 per month. Employer to pay top-up to normal salary – unless agreed otherwise – together with the cost of employer NI and statutory pension contributions for both hours worked and not worked. |
| 1 October 2020 – 31 October | Government will pay 60% of salary up to £1,875 per month. Employer to pay top up to normal salary – unless agreed otherwise – together with the cost of employer NI and statutory pension contributions for both hours worked and not worked. |
Can I reduce wages in line with the above?
Yes. The furlough scheme makes the assumption that a worker is being paid 100% of their salary and as an employer you pay the additional 20% to employees.
In practice, few have done this and, for those in this position, they should have agreed with the employees for a temporary change to their terms and conditions.
Provided that the employee agrees to further changes to their pay level in line with the above reduced funding, there should be no reason why you cannot pay at the reduced level to avoid having to lay them off or make them redundant. As always with employment matters, it is best practice to take advice as this is a specialist area.
Any hours that the employee works for you should, of course, be paid at full pay.
Any there any other measures that have been announced?
Yes, in relation to the self-employed, as the scheme has been extended for a further three months until the end of August, but subject to a maximum claim of 70% of average earnings capped to £6,570.
However, few consultants carrying out private work will be eligible for this grant due to other earnings.
Ian Tongue is a partner with Sandison Easson accountants