What is flexible furlough leave?

Updated on 09 November 2020

The Coronavirus Job Retention Scheme (CJRS or ‘furlough leave’) was due to end on 31 October 2020, and be replaced with a new Job Support Scheme (outlined in this article). However, the government have since confirmed that the furlough leave scheme will be extended until 31 March 2021. Read our latest article on the extended furlough scheme.

An important part of the business support measures provided by the government to help business during the economic crisis created by coronavirus pandemic, is the Coronavirus Job Retention Scheme (or ‘furlough leave’). Furlough leave is a temporary leave of absence for economic reasons designed to save jobs. For more details about the furlough leave scheme, including eligibility criteria, see our furlough leave FAQs for employers.

On 29 May 2020, the chancellor, Rishi Sunak, announced the new concept of ‘flexible furlough leave’. From 01 July 2020, a number of important changes are made to the furlough leave scheme, to add greater flexibility for employers. On 12 June 2020, a raft of additional and updated guidance supplemented those announcements and gave further detail about this new form of flexible furlough leave.

The key features of the new ‘flexible furlough leave’ scheme are:

• An employee can be placed on furlough leave instead of being dismissed or laid off;
• To be eligible to be placed on furlough leave the employee must either:
  • have previously been furloughed for at least three full weeks before 30 June 2020 (so have been furloughed on 10 June 2020 at the very latest); or
  • be returning to work from a period of family friendly leave (e.g. maternity, paternity, adoption, shared parental or parental bereavement leave), or from a period of mobilisation as an armed forces reservist;
• The employee will remain on the payroll and continue to accrue continuous service/annual leave;
• The furloughed employee will be entitled to a minimum of 80% of their pay (capped at £2500 per month);
• Until 30 June 2020, HMRC will reimburse a maximum of 80% of furloughed workers wage costs (capped at £2500 per month) plus employer’s NICs and minimum automatic enrolment employer pension contributions on that wage;
• From 01 July 2020, a new flexibility is introduced into the scheme to allow the employee to work part time for their own employer (with the employer being required to meet the costs associated with such work);
• From 01 August 2020 onwards, employers will need to meet some of the costs of the furloughed employee on a sliding scale (summarised in more detail below), irrespective of whether or not they work part time;
• The scheme has been extended until 31 October 2020, and may be further extended;
• From 01 July 2020, the minimum period of furlough leave is one week (reduced from three weeks); and
• Employers submit information to HMRC confirming which employees have been put on furlough leave and their earnings through a new online portal.

We consider some of the frequently asked questions we encounter about flexible furlough leave below.

Placing staff on flexible furlough leave

Which staff can I place on flexible furlough leave?

To be eligible to be placed on furlough leave from 01 July 2020, the employee must either:

• have been previously furloughed for at least three full weeks before 30 June 2020 (so have been furloughed on 10 June 2020 at the very latest); or
• be returning to work from a period of family-friendly leave (e.g. maternity, paternity, adoption, shared parental or parental bereavement leave), or from a period of mobilisation as an armed forces reservist.

Can we place staff who are shielding or who have caring responsibilities on flexible furlough leave?

You can only do so if they otherwise meet the criteria (i.e. they have been furloughed for at least three weeks prior to 30 June 2020, or are returning from family-friendly leave or mobilisation as an armed forces reservist).

How long can workers be furloughed for?

This is one aspect of the furlough leave scheme that has changed:

• Until 30 June 2020, the minimum length of furlough leave was three weeks; and 
• From 01 July 2020, there is no minimum length of furlough leave, but the minimum claim period is one week.

The furlough leave scheme is due to end on 31 October 2020 (but it may be extended further).

Can we ask an employee to go on ‘partial’ or flexible furlough leave after 01 July 2020?

From 01 July 2020, when the flexible furlough scheme commenced, it will be possible to allow workers to work part time. This could involve the worker working on some days (or part days) and being furloughed on other days (or part days). Any sort of working pattern is permitted under the flexible furlough scheme.

Taking a full-time employee as an example:

• Employee A could work on Monday and Tuesday and be furloughed on Wednesday, Thursday and Friday (i.e. 40% of their normal working hours);
• Employee B could work on a two-week shift pattern which involves them working Monday and Friday in week one, and Tuesday, Wednesday and Thursday on week two (i.e. 40% of their working hours in week one, and 60% of their working hours in week two), with the remaining hours being furlough leave; or
• Employee C could work half a day (mornings) on Monday to Friday (i.e. 50% of their normal working hours), with the Mon-Fri afternoons being furlough leave.

Taking a worker contracted to work 21 hours per week as an example:

• Worker D could agree to work 11 hours split over the week and be furloughed for 10 hours.

The employer and worker must agree in writing (or reach collective agreement with a trade union) what the flexible furlough working arrangements will be and the employer must keep records (see below). In practical terms, short-time working on anything less than full pay can only be imposed in accordance with any contractual terms, or by express agreement to vary the terms of the contract. We recommend that specific advice be sought on this.

What can (and can’t) a worker do during flexible furlough leave?

This depends on whether the time is classed as a working hour or furlough leave hour:

• Working hours: the worker can undertake their normal duties, or any other duties they can be required to perform under their contract, or any other duties by agreement between the employer/worker. They must be paid in full for (and the employer must meet the costs associated with) any time spent working;
• Furloughed hours: the worker cannot perform any work that generates revenue for, or provides services to, their employer (or any associated employer). They can:
  • take part in volunteer work for another organisation;
  • complete online training courses while they are furloughed, provided they are paid at least the national minimum wage/national living wage for the time spent completing such training; or
  • undertake duties and activities, as a trade union or non-union employee representative, for the purpose of individual or collective representation of employees/workers (e.g. in a collective redundancy consultation exercise).

Do we have to allow a furloughed worker to work part time?

No, it is an employer’s choice to use the flexible furlough leave element. You can continue to fully furlough workers until the scheme ends on 31 October 2020 should you wish. Care should be taken to ensure any decision making is reasonable and non-discriminatory.

What records do we need to keep of flexible furlough leave?

To be eligible for the grant, employers must agree the flexible furlough leave arrangement with the worker (or reach collective agreement with a trade union) and keep a new written agreement that confirms the new furlough arrangement. Employers must keep the following records for five years:

• The written flexible furlough agreement reached with the worker (or the collective agreement); and
• Records of how many hours the worker has worked and been furloughed (i.e. not working).

How do we choose which employees are placed on flexible furlough leave and which are required to remain on full furlough, or to work?

You do not need to offer all of your employees flexible furlough leave. You may choose to leave some staff fully furloughed, or to require them to work as normal. It is also in keeping with the scheme to rotate periods of full furlough with periods of work or flexible furlough (provided both members of staff have been previously furloughed and are otherwise eligible).

Choosing who needs to remain on full furlough leave, and who will be offered a flexible furlough leave arrangement, may prove a challenging task for some employers.  This may be especially true where an employer has not topped up pay to 100%, because in practical terms those on flexible furlough will see their income increase when compared to those fully furloughed.

The starting point is to consider business needs – which roles are critical to the business functioning or in demand? Care must be taken to avoid direct or indirect discrimination in the selection process and, if you must select between staff doing identical roles, you may wish to consider either asking for volunteers to work, having a selection matrix (akin to in a redundancy selection exercise), or using a method of randomised selection.

You may also wish to factor into your assessment:

• Do any of the staff fall within any of the high-risk or shielding categories (and therefore could fully furloughing them offer a way to minimise their risk)?
• Do any of the staff want to be fully furloughed because they have caring responsibilities (including caring for an individual who is shielding)?
• Should staff rotate between periods of work, flexible furlough leave and periods of full furlough leave?

Can an employee on furlough leave work elsewhere?

The answer to this depends on the circumstances:

• If the employee already has more than one employer, they can be furloughed for each job (the furlough leave reimbursement applies to each employer individually). This could lead to a situation where an employee with two employers is furloughed from neither, one, or both of their jobs;
• A furloughed employee can undertake voluntary work (e.g. delivering food parcels to vulnerable individuals) and, in due course, may be permitted to take a period of emergency volunteering leave (if this is brought into force) to allow them to volunteer in the fight against coronavirus; and
• If contractually allowed, or with the express agreement of their employer, a furloughed employee is permitted to work for another employer during furlough leave.

Claiming the furlough grant

How much pay can we recover under the furlough leave scheme?

There is detailed HMRC guidance on how much you can claim, but in summary:

• Until 30 June 2020, employers will receive a grant from HMRC to cover:
• The lower of 80% of an employee’s regular wage or £2500 per month
• Plus, the associated employer’s national insurance contributions
• Plus, the employer’s minimum automatic enrolment employer pension contributions

An employer cannot claim the furlough grant for:

• Additional National Insurance or pension contributions made because the worker’s pay is topped- up above 80%
• Any pension contributions that are above the mandatory employer contribution
• The cost of non-monetary benefits provided to employees (e.g. taxable benefits in kind such as life cover)
• Benefits provided through salary sacrifice schemes (including pension contributions) – although it may be possible for the worker to opt-out of salary sacrifice and HMRC agrees that coronavirus and being furloughed is a ‘life event’ for the purposes of any opt-out of salary sacrifice

Where the employer provides benefits to furloughed employees, these should be additional to the minimum wages that must be paid under the terms of the scheme.

Starting on 01 July 2020, a number of changes have been made to the furlough leave scheme that will increase the employer’s minimum financial contribution. In summary, these are:

There is a detailed worked example of flexible furlough leave, which provides more detail of the calculations an employer will need to perform if the worker is to work part time.

The furlough leave scheme is currently expected to close on 31 October 2020.

During furlough leave

Will a furloughed employee be entitled to their contractual benefits and to accrue annual leave?

The furloughed employee will be entitled to continue to receive all of the non-discretionary benefits of their contract, including the right to accrue annual leave, unless they expressly agree to waive these. Statutory benefits e.g. 5.6 weeks’ holiday per annum and minimum pension contributions under the pension’s auto-enrolment scheme cannot be waived and must therefore continue. It may be possible to agree with staff the waiver of other contractual benefits. However, this will involve a change of contractual terms, so we recommend you take advice on this.

Can we undertake collective consultation during furlough leave?

Yes, you can. Taking part in a collective consultation process (e.g. for collective redundancies, or in connection with a proposed contractual variation) is unlikely to amount to ‘work’, because it does not provide services to, or generate revenue for, their employer. By analogy, consultation of this nature can be undertaken during maternity leave without the employee having to terminate their maternity leave early.

Will we need to bring trade union or employee representatives off furlough leave during any collective consultation process?

No. The guidance has been amended to confirm: ‘Whilst on furlough, employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers.’  Therefore, provided the activities undertaken do not provide services to the employer, or generate an income for the employer, they can be undertaken while the trade union or elected employee representative remains on furlough leave.

Can we give notice of dismissal whilst employees remain on furlough leave?

The government have changed the furlough leave guidance to confirm that an employer can claim under the CJRS whilst an employee is ‘serving’ a period of statutory or contractual notice. The reference to ‘serving’ a period of notice, makes it unlikely that this will cover a payment in lieu of notice – rather the employee must remain on the employers books if the notice pay is to be partially recovered under the scheme. This may, in turn, affect how much service an employee has and open up the prospect of additional employment claims, which are dependent on acquiring a minimum period of continuous service.

For further updates and other articles discussing the impact of the coronavirus please view our coronavirus hub.

If you have any queries regarding furlough leave or any other employment matter, please do not hesitate to contact Emma Ahmed, or browse our employment services.