The extended furlough scheme what do employers need to know?

Extended furlough scheme

There are two fundamental changes that have been announced to the Coronavirus Job retention scheme:

  1. The introduction of flexible furlough arrangements from 1st July 2020
  2. The reduction in government funding

You can find the detailed guidance here

The purpose of this post is to highlight the key things that employers need to be considering:

Getting staff to take holiday while on Furlough

Employees are still accruing holiday while on Furlough, a lot of employers are concerned that once employees return to work they will want to be taking annual leave and as a result employers will have no staff when they need them.

A solution to this is getting staff take annual leave whilst they are on furlough.  To do this an employer needs to give twice the notice of the annual leave, i.e. if an employer wants them to take a week annual leave then the employee needs to be given two weeks’ notice.

If the employee takes holiday while on furlough, then then as an employer you will need to top up the grant to ensure the employee gets 100% of their wages.

Ideally this leave needs to be in July or August while the funding is 80% rather than in September / October when the funding is 70% then 60%.

Flexible Furlough – working with the staff to meet company needs

Under the new rules’ employees can be brought back for any amount of time and any pattern the employer sees fit.  Unless they are returning from Parental Leave the employee must have been furloughed on or before 10th June 2020.  The minimum claim for an employee is 7 working days.

With this flexibility as employers need to be looking at staffing requirements, who they need to come back and when.  Giving the required notice and looking at working patterns.  This is the perfect time to revisit the business forecasts for the next six months.

Record keeping will also need to be in place to identify working hours and furlough hours so that the correct claims are made.

Cashflow impact of reduced funding

Revisit your cash flow forecast, with restrictions going on longer than anticipated and changes to the scheme your cash flow will need updating.  It is important to understand how the reduced funding will impact your cashflow.  In October there will be a cost of 40% of the furloughed staff wage bill plus pension and NIC.  For a business that is still not fully operational it is really important to understand your numbers, and highlight any potential cashflow issues over the next few months so that they can be dealt with.

Starting the redundancy process

Redundancies are an inevitable consequence of COVID19, employers can start the process while staff are on furlough, but the grant can not be used to substitute redundancy payments.

Once the furlough scheme ends in October staff will either return to work on full pay or be made redundant.  There is no indication that this scheme will be extended again.

If you know staff redundancies are going to be made, then start the process sooner rather than later while there is government support available.

Making sure correct records are being kept

Should HMRC inspect you will need to ensure that adequate records have been maintained, this includes copies of employee’s furlough agreement, recording of hours worked and hours on furlough leave.

Other key points:

  • No work can be undertaken by staff during furlough hours
  •  Where staff take holiday under a flexible furlough arrangement these hours are classed as furlough hours.
  • Training can be undertaken during furlough hours
  • Staff that are returning from parental leave can be furloughed subject to certain criteria

If you need any help or support please get in touch

Carrie Stokes Chartered Accountant

Carrie Stokes Chartered Accountant

I work with directors of limited companies in Shropshire, Staffordshire and the West Midlands giving them a clear and up to date financial picture of their business that they understand. Looking at the numbers, what they mean and how they can be improved to grow their business.

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