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Coronavirus Guides: Furlough Scheme to be wound down

Since April employers have been able to claim up to 80% of their costs for furloughed staff under the Coronavirus Job Retention Schemes (“CJRS”). Last month the chancellor has announced the gradual winding down of the furlough scheme. Starting in July major changes will come into effect:

  • The current furlough scheme ended on 30 June 2020. The deadline to make a claim under the old scheme is 31 July 2020.
  • A new, revised furlough scheme came into effect on 1 July. The main changes under this scheme are:
    • It is now possible to furlough staff flexibly: staff can work part time for their employers and employers can make a furlough claim for the time not worked.
    • The minimum furlough period has been reduced from 3 weeks to 7 days.
    •  Claims can only be made for one month at a time. Payrolls that straddle two months will have to be split between two claims.
  • The amount that can be claimed will be reduced in steps starting in August.  The scheme will be closed on 31 October 2020. The table below explains how the scheme will change in the next few months:
  • As the amount of claim is being reduced, the employer will need to make up the difference to ensure that the employee receives at least 80% of their pay, or £2,500. The employer can continue to top the pay.
  • Unfortunately HMRC guidance appears to change continuously. A further is expected on 11 July. We will update you if there are major changes.

What does Flexible Furlough mean?

Until 30 June employees that were placed on furlough were not able to do any work for their employers. This will change from 1 July: Employees will now be able to work for their employers for any amount of time and employers will be able to make a furlough claim for any hours not worked.

Here’s how it works: If an employee normally works for 40 hours per week and the employee is brought back to work for 10 hours a week, then the employer can make a furlough claim for the 30 hours not worked.

Employers have complete flexibility in deciding how many hours the employees can work. Any employee not returning to work can remain fully furloughed.

There are a few rules to watch out for:

  • New furlough agreement: If a furloughed employee is going to return for part-time work after 1 July you will need to put in place a properly drafted furlough agreement. The agreement must cover a period of least one week. This needs to be confirmed in writing by the employee. If you are a Beans client, then we can provide a template agreement.
  • Employees must have been previously furloughed for at least 3 weeks by the 30 June. No employee can be furloughed for the first time after 1 July (there are some exceptions to this rule). That means the last date an employee could have been furloughed for the first time was 10 June.
  • Furlough periods started in June: Before you start a flexible furlough period you must make sure that any furlough period started in June must have lasted for at least 3 weeks. Otherwise you will not be able to claim for that period.
  • You should claim after the pay period has been completed. Only then will you know for certain the number of hours that the employee has worked. It is not against the rules to claim in advance, but there is a risk that you will have make a repayment of the grant for errors.
  • Records: You must keep detailed records to support your claim, if HMRC decide to inspect. These must include:
    • The usual hours worked by the employees: these are the hours the employees would have worked had they not been furloughed.
    • The number of hours your employees have actually worked;
    • the number of hours they were not working – these are the hours that will become the furlough claim.

Please bear in mind that the rules to work out your furlough claim are very complex.

  • These changes have made the scheme much more complicated. This hasn’t been helped by the fact that HMRC have themselves provided incorrect guidance that was later withdrawn. The latest detailed HMRC guidance on how a claim can be worked out can be found in the link: HMRC calculation of furlough claim

What about directors? 

So far directors have been able to make a furlough claim if they did not work for their businesses. However, directors were able to continue performing their statutory duties. When it comes to flexible furlough for directors, no guidance is available. In the absence of any direction, our tentative view is as follows:

  • If a director has an employment contract, then the “usual” hours will be formally documented, and this could be used to determine the claim under the flexible furlough rules. Detailed time records will be required to determine actual hours worked.
  • If a director has no employment contract in place, then it will be difficult to determine the “usual” hours worked. It is unlikely that a director has kept a record of actual hours worked in the last year. Therefore, it is unlikely that a flexible furlough claim can be made. It is possible that further guidance will be provided in the next few weeks. Therefore we advise directors who intend to work flexibly to keep detailed time records in case a claim could be made.
  • For directors who intend to remain fully furloughed, a claim can be made as before.

And don’t forget: 

  • An employee may not work for the business in any way during the period claimed for furlough. HMRC believe that there has been abuse of the scheme. Draconian legislation is expected to be introduced soon to allow HMRC to investigate claims and to impose high penalties of up to 100%. It is essential that you retain good quality documentation for a period of 6 years to support a claim.
  • Any furlough arrangements must comply with the employee’s employment contract and employment law. For instance, you must pay the full salary when an employee is claiming holiday pay. You should make sure that written, signed furlough agreements are in place. If in doubt, please take employment advice (we can put you in touch with HR professionals, if you need help).
  • The grant will be treated as taxable income on the employer’s tax return.

How Beans can help?

If you have any question you should get in touch with us. If you are Beans client, we can support you in the following ways:

  • Advise you on the operation of the scheme for your business.
  • Connect you to a HR support facility.
  • Help determine furlough status of you employees.
  • Provide templates for letters to furloughed employees. These are available to clients at no charge.
  • Calculate furloughed pay calculations.
  • Prepare grant claim.

Further information?

See the link to the government publication here: HMRC Coronavirus Job Retention Scheme


The rules for the Employee Job Retention Scheme are subject to change as the government/HMRC issue further guidance and clarification. While we make every effort to make sure this guide is accurate and up to date, you should take professional advice before acting on the information provided here. If you contact us, we will be happy to help. Beans cannot take responsibility for actions taken and losses incurred as a result of actions taken or not taken based on the information provided here.


Coronavirus Guides: Furlough Scheme to be wound down
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