The furlough scheme is changing

As widely anticipated, the Chancellor used the Government press conference on 29 May to announce further details of the extended furlough scheme (see our alert here for news of the extension), which came with a few surprises:

First, the contribution towards the cost of the scheme required by employers from August will be less than many feared, and will be brought in gradually. From 1 August, employers will no longer be able to seek reimbursement of the cost of employer national insurance and auto enrolment pension contributions on the furlough salary (estimated to account for around 5% of the cost of the scheme on average). From September, employers will also have to start paying 10% of the furlough salary (with the Government continuing to pay 70%) and from October, this will increase to a 20%/60% split, before the scheme closes for good on 31 October 2020.

Second, the Chancellor promised “maximum flexibility” under a new look scheme from 1 July, a whole month earlier than expected. While further details are promised for 12 June, it is clear that the scheme will accommodate a range of flexible working arrangements, as agreed with the relevant employee, including part-time and various shift patterns, with furlough pay still being available for normal hours not worked. This is welcome news for employers planning for a phased return to work over the coming months as lock down is beginning to ease.

Third, and in an important restriction, the scheme will close to new entrants on 30 June. From this point, employers will only be able to furlough employees who have already been furloughed for at least three weeks prior to 30 June (the minimum period valid for furlough under the current scheme). This means that the latest date by which an employer can furlough an employee for the first time will be 10 June.

While some cost will have to be borne by employers for the last three months of the scheme, the flexibility it will afford from as early as next month will be massively helpful for the many employers considering a gradual reopening of workplaces. However as always, planning ahead is key. Along with all the other challenges, not just in relation to ensuring a safe workplace to which to return and the potential reshaping of businesses on many employers’ minds, decisions as to whether to furlough additional employees to be able to take advantage of that flexibility further down the line will now have to be taken in short order.

Read the latest updates in our FAQs for employers.