CJRS: Flexible furloughing from 1 July 2020

16th Jun 2020
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Changes to the government’s Coronavirus Job Retention Scheme (CJRS) will apply from 1 July 2020.  The changes will allow employers to bring furloughed workers’ back part-time, but will only apply to workers’ who have been furloughed by 10 June 2020.

From July 1, the scheme introduces changes which will:

  • Ask employers to contribute to some of the costs associated with the CJRS from August so that they can begin to reduce government support
  • Allow ‘flexible furlough’ within the scheme to enable employees to work part-time from July (but still qualify for furlough pay for time when they are not working)

Who is eligible for flexible furlough?

To be eligible to claim for the flexible arrangement, workers must have been furloughed for at least three consecutive weeks between 1 March and 30 June 2020.

The cut-off date for putting workers on furlough for the first time was 10 June 2020 to allow the minimum three-week period to be completed by 30 June 2020.

What is changing?

From 1 July 2020, workers will be able to do part-time work while on furlough. It will be up to the employer and worker to agree what the working arrangements will be on their return.

Employers will be responsible for paying the wages of these employees while they are in work.  However, they can claim the Coronavirus Job Retention Scheme for normal hours that aren’t worked.

Between 1 August 2020 until the end of October 2020, employers will be required to contribute to the scheme alongside the government.

Here’s what the new changes look like:

June: The government pays 80% of wages, capped at £2,500. It also pays employer National Insurance and pension contributions. Employers don’t have to pay anything.

July: The government pays 80% of wages, capped at £2,500. It also pays employer National Insurance and pension contributions. Employers don’t have to pay anything but ‘flexible furlough’ will be an option.

August: The government pays 80% of wages, capped at £2,500. Employers have to pay for employer National Insurance and pension contributions.

September: The government pays 70% of wages, capped at £2,187.50. Employers have to pay for employer National Insurance and pension contributions, and 10% of wages – with the 70% from the government, this makes up the 80% total, capped at £2,500.

October: The government pays 60% of wages, capped at £1,875. Employers have to pay for employer National Insurance and pension contributions, and 20% of wages – with the 60% from the government, this makes up the 80% total, capped at £2,500.

How will part-time work during furlough affect the government grant?

Employers will be required to pay the worker’s normal wages for any hours worked when not on furlough. The guidance does not make clear whether a worker’s ‘normal wages’ for hours they work are permitted to be reduced by agreement and so we can assume ordinary employment law considerations would apply.

Any hours worked will reduce the maximum government grant available on a pro-rata basis. To calculate the proportional grant, the employer will have to calculate the employee’s usual working hours, then subtract the hours actually worked during the claim period. This will give the number of furlough hours in the claim period. Government funding under the scheme will only be available in respect of furlough hours.

How do you work out a worker’s usual hours?

For a worker who has fixed contractual hours, the workers’ usual hours will be their normal contractual hours at the end of the last pay period ending on or before 19 March 2020.

For a worker, whose hours vary, the guidance states that the worker’s usual hours will be the higher of the average number of hours worked in the 2019/20 tax year or the hours worked in the corresponding period within the 2019/20 tax year.

The employer will then need to calculate the number of usual hours in the relevant claim period. For example, a worker who is contracted to work 40 hours per week will have usual hours of 40 hour per week. If the employer claims for the whole month of July, it will need to calculate the number of hours in the month. This is done by dividing 40 (the weekly hours) by seven (the number of days in a calendar week), to give daily hours, and then multiplying this by the number of days in the claim period (in this case, 31 days in July). Where this does not produce a whole number (in this case, 177.14) the hours are rounded to the nearest whole number (i.e. 178). The worker's usual hours for July are 178. 

How do you work out furlough pay for flexible furlough?

Workers who are on full-time furlough must receive 80% of their regular wages up to the cap of £2,500 per month. Workers on flexible furlough must receive a proportionate amount based on the number of furlough hours. The number of furlough hours is calculated by taking the worker's usual hours in the claim period and subtracting the number of hours actually worked in that period. The fraction of furlough hours against usual hours is then applied to the 80% of wages up to the £2,500 cap.

In the example above, if the worker works 92 hours in July, the number of furlough hours in July is 86 (178 minus 92). The fraction of furlough hours as against usual hours (86/178) is then applied to the £2,500 to give the maximum that can be claimed under the Scheme (£1,207.87). This same fraction is applied to 80% of the worker's wages up to £1,207.87 to give the amount the employer must pay for the furlough hours for that period.

Final thoughts

From the beginning of July, employers will be able to bring employees back to work part-time and still claim a grant for furlough pay.

For worked hours, employers will be responsible to pay their wages, subject to their employment contract, including tax and NICs due on those amounts.

Employers will need to report hours worked against the usual hours an employee would be expected to work in a claim period. 

The end date for Coronavirus Job Retention Scheme is 31 October 2020.

To help you and your clients navigate through the new normal, visit our Accountant and Bookkeeper’s Hub to access a range of free tools to support you as your clients recover from these unprecedented times.