Flexible furlough and other support

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    Ray Newman

    Ray Newman UKBF Regular

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    When Chancellor Rishi Sunak announced the coronavirus job retention scheme (CJRS) back in March, it was relatively straightforward: either your employees were furloughed, or they weren’t.

    It couldn’t have been clearer and those who bent the rules, asking furloughed staff to do a bit of work on the quiet, are currently squirming under HMRC’s thumb.

    Now, things have become a little more complicated – or rather, to put a positive spin on it, more flexible.

    Since 1 July, employers have had the option to bring back furloughed staff on a part-time basis, with the Government making up 80% of the remainder of their lost earnings.

    This is all part of Sunak’s plan to get the economy supporting itself as the COVID-19 crisis begins to ease and lockdown restrictions are lifted.

    For a Chancellor who generally seems more keen to please than bullish, he struck a firm note in his speech on 8 July:

    “Furlough has been a lifeline for millions, supporting people and businesses to protect jobs. But it cannot and should not go on forever. I know that when furlough ends it will be a difficult moment. I’m also sure that if I say the scheme must end in October, critics will say it should end in November. If I say it should end in November, critics will just say December. But the truth is: calling for endless extensions to the furlough is just as irresponsible as it would have been, back in June, to end the scheme overnight.”

    The last applicants for the scheme were admitted on 31 June and, Sunak insists, CJRS will close for good on 31 October 2020.

    Between now and then, the scheme will taper off, with the next round of changes set to kick in from 1 August:

    • August – the Government will pay 80% of wages up to £2,500 for the hours an employee is on furlough, with employers picking up national insurance and pension contributions for furloughed time.
    • September – the Government will pay 70% of wages up to a cap of £2,187.50 with employers paying NICs and pension contributions, as well as topping up employees’ wages to 80%.
    • October – the Government’s contribution drops to 60%, up to a cap of £1,875, with employers covering NI and pensions and making up pay to at least 80%.

    The hope is that this will sharpen employers’ thinking – do I really need this member of staff on furlough, or is it time to bring them back? Or, as some have already decided, is it time to accept reality and make redundancies?

    The post-furlough bonus

    Having had more hits than misses until this point, some of the other measures Sunak announced in his 8 July update seemed surprisingly limp. 

    In particular, there was a new grant for employers designed to avoid a long summer and autumn of redundancies by encouraging them to continue to employ staff brought back from furlough until at least January 2021.

    It amounts to £1,000 per retained employee earning at least £520 on average from November to January, with payments to be made in February 2021.

    But who does this really help?

    On LinkedIn, Mike Seiferling, Assistant Professor in Public Finance at University College, London, neatly summarised the problem with the new ‘jobs retention bonus’:

    "Firms who can't see a business case to keep staff on until January 2021 will not be enticed by an extra £1,000… and firms who can see a business case to keep staff on do not need an extra £1,000."

    Even Jim Harra, chief executive of HMRC, wasn’t impressed by the policy, writing to the Chancellor to put his concerns on record ahead of the mini-Budget speech: “I am unable to reach a view that this represents value for money.”

    Still, if you’re running a business, have brought back staff, and intend to keep them, you might as well claim… right?

    High street chains Primark and John Lewis have both said they won’t be claiming the grant, even though it would have amounted to £30 million for the former and £7m for the latter. Why? Public relations, I suspect, combined with a wary eye on the mountain of paperwork a claim would entail.

    Flexible furlough tips

    Accountant Peter Watkins of Blue Penguin has become something of a furlough expert in the past couple of months – he’s had to! – and offers tips on handling changes to the scheme:

    “Regardless of the work pattern, you’ll need to do the flexible furlough calculations for all employees – and now it's based on working days, not a per-month basis, you may not be able to claim a full 80% of wages despite the employee being on furlough for the whole period.

    “This isn’t going to be a walk in the park for variable-hours staff. You’ll need to dig out timesheets for the whole of the 2019/20 tax year to determine what constitutes their ‘usual hours’. That might be a very different figure to what’s in their contracts.

    “And remember, there is no minimum furlough period any more, so if you want to bring your staff back for a couple of days a week each and share the love, you can. That might help avoid resentment among those at the coal face.

    “Finally, if you don’t have an accountant or in-house payroll team to handle all of this, there is a useful calculator on the HMRC website. It’s not foolproof but it is pretty good.”