Legal basis of flexible furlough scheme published
26 June 2020
The government has published an updated Treasury Direction which sets out the legal framework for the changes to the furlough scheme that come into effect on 1 July.
The main change is to enable part-work/part-furlough. This is achieved through a complex mechanism requiring employers to calculate the “baseline” number of “usual hours” in order that it can be compared with the actual hours worked. More information about the changes to the furlough scheme can be found here.
Everyone is flexi-furloughed
As soon as the guidance was published and the complexity of the flexi-furlough calculations became clear, employers started to look at whether it might be possible to avoid flexi-furlough. The Treasury Direction makes it clear that any furlough arrangement after 1 July 2020, is a flexi-furlough arrangement. It is only possible to avoid the flexi-furlough calculations if an employee is on furlough for the whole of the claim period. This means that:
- If any employee returns to their normal hours mid-month (including, for example, on Monday 6 July), the employer would need to undertake the hours calculation in order to calculate the furlough grant in the period before the return date.
- The hours calculation would be required in a rotated furlough scenario where the “change-over” occurs mid-month even though the rotated employee is either on full-furlough or working all their normal hours.
The only way to avoid the calculations is to ensure that the claim period is aligned with the rotation. For example, employees could be rotated on and off on a monthly basis. Or the rotation could happen mid-month, in which case the employer would be required to make two separate claims in each month. In either case, it would be necessary to accommodate a mid-week rotation where the start of the month does not correspond with the start of the week. For example, 1 September is a Tuesday.
Is there a change to the furlough conditions of an employee on a part-work and part-furlough arrangement?
No, the Treasury Direction confirms that the furlough conditions remain the same. An employee cannot do any work on furlough (even if they are working at other times).
The Treasury Direction still makes no reference to whether consultation with employees is allowed during furlough. The only comfort is that the employee guidance confirms that employee representatives may still undertake duties and activities for the purpose of individual or collective representation of employees or other workers while they are on furlough so long as this is not providing services to or generating revenue for the employer.
Are calculations still as complicated?
Yes, there is no change to the underlying methodology of the calculations (which are complicated and require you to take account of non-working days, leading to surprising results). The Treasury Direction does however confirm that for salaried employees the number of “usual hours” is the number included in the contract.
The government has prepared a number of examples to assist with the calculation and has updated its calculator.
Is there a change to who can be on furlough?
The position remains that only employees already furloughed for 3 weeks before 1 July can benefit from the extended furlough period.
However, for employees falling into that category, the Treasury Direction makes it clear that furlough is possible "to prevent or limit the further transmission” of Covid-19. This is a welcome addition for employers who may have sufficient work for employees who are shielding or otherwise vulnerable but would want to be able to continue to utilise the furlough scheme.
The Treasury Direction has been amended to include reference to the fact that “integral to the purpose” of the scheme is that the amounts being claimed are used by the employer to continue the employment of employees. It is unclear whether this intended to limit the continued use of the furlough scheme during redundancy consultation or prevent employers from claiming the grant whilst an employee is on notice. If that is the intention the position has not been made clear and the employee guidance continues to say that “your employer can still make you redundant while you’re on furlough or afterwards”. More information about furlough, redundancy and notice is included in our Furlough FAQs and our Restructuring FAQs.
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