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Furlough guidance update

[Guidance is changing quickly and this was correct at time of posting]


On the afternoon of Friday 26th June 2020, the Government issued a further Treasury Direction (TD) setting out rules that will apply to the Coronavirus Job Retention Scheme (CJRS) from 1 July 2020 until 31 October 2020 which is when we are told the scheme is to be wound up.

With effect from the 1st July 2020 (this coming Wednesday), employers can continue to take advantage of the CJRS by keeping staff fully furloughed as before or they can enter into a new, flexible arrangement whereby employees return on a part-time basis but remain furloughed for the rest of the time.

It is up to the employer to decide the proportions of work but they will have to reach a new agreement with employees (that agreement must be made or confirmed in writing) which the TD states must be kept until at least 30 June 2025 (however, it is recommended to keep such records for six years in line with guidance elsewhere).    

Importantly, the TD says that the agreement between employer and employee should be made before the beginning of the period to which the CJRS claim relates so if you are looking to get a flexible arrangement in place to start on Wednesday or shortly after, time is of the essence.

In the main, the new TD confirms what we already knew from the previously published guidance (see below) but there remain one or two grey areas; most notably as to whether a CJRS claim can be made by the employer for reimbursement of notice pay.  

While there is nothing that expressly prevents a claim for reimbursement of notice pay being made, paragraph 2.2 (under the heading ‘Purpose’) states that it is ‘integral’ that the amounts paid to the employer pursuant to a CJRS claim are used to continue the employment of employees.   Further, paragraph 2.5 says that no claim may be made that is contrary to the exceptional purpose of CJRS. 

It could be argued that the purpose of the scheme - job retention - is not met if notice has been served. However, serving notice (as opposed to making a payment in lieu) means an employee remains employed (and accrues benefits that they may not otherwise) during that period.  

In any event, one would hope that if a claim for reimbursement of notice pay was not permitted, this would be expressly stated. 

Away from the TD, it is expected that the forthcoming Finance Bill 2020 will impose penalties on those employers that deliberately make an incorrect CJRS claim (and those who deliberately do not use the money received from the CJRS to pay the wages of furloughed staff). The inclusion of the word ‘deliberately’ should provide reassurance to those who genuinely believe they have abided by the rules and there will be a 30 day amnesty period from when the legislation comes into force during which employers can repay money erroneously claimed without fear of additional penalties being levied. 

If you are minded to take advantage of the flexibility permitted by the CRJS from 1 July 2020, it is important to review the TD (the link is here https://www.gov.uk/government/publications/treasury-direction-made-under-sections-71-and-76-of-the-coronavirus-act-2020) as it sets out, in detail, the way of calculating the amounts that are payable to a flexibly furloughed employee by an employer and the amounts that can be claimed under the CJRS for that employee.

As a quick reminder the headline points are as follows:

  • In order to be eligible for furlough from 1 July 2020 an employee must have already been furloughed for three weeks on or before 30 June 2020 (save in respect of those returning from parental leave/armed forces reservists.
  • After 1 July 2020 there is no minimum period of furlough, except where a period started after 10 June 2020 needs to be completed.
  • There is a cap on the number of employees who can be furloughed at any one time (that is under any one claim).
  • CJRS claims cannot be made for overlapping months.
  • During July, employers must pay employees in full (including employers NI and pension) for any work that employee undertakes and can make a claim under the CJRS (and pay to the employee the monies received) in respect of the contractual hours not worked by that employee (known as the furloughed hours) subject to the 80%/£2500 cap.
  • Employers must record, and keep for six years, the hours actually worked by the employee, the usual hours they would have worked but for the coronavirus pandemic and the number of furloughed hours.
  • If employees remain fully furloughed the calculations above do not need to be performed.
  • From 1 August 2020, employers will be responsible for paying all employers NI and pension contributions while the government will continue to pay 80% of wages capped at £2,500.
  • From 1 September 2020, the government will pay 70% of wages capped at £2,187.50. Employers continue to be liable for all employers NI and pension contributions and must top up wages by 10% so the employee continues to receive 80%.
  • From 1 October 2020, the government contribution drops to 60% (capped up at £1875) with the employer obliged to top up by 20% (and pay all employers NI and pension contributions).

If we can be of assistance to you in any area of employment law, please don’t hesitate to contact Samantha Dickinson or Martin Williams.