Furlough scheme extended until end of October

The chancellor, Rishi Sunak, has announced that the furlough scheme will continue in its current form, without any changes, until 31 July 2020. New flexibility will be introduced from the beginning of August, however, with the aim of getting employees back to work and boosting the economy. 

From 1 August 2020, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff. The chancellor’s statement included this: “The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.”

We have updated our FAQs on furloughing employees to reflect this latest announcement.

Details of extension to follow

The precise implications of the extension for both businesses and workers will depend on the finer details, which the government is promising by the end of May 2020. The key points we would expect to see clarified are:

• Eligibility. Will the more flexible scheme only be available to employees who are already furloughed (and so able to be brought back to work part-time)? The government’s announcement seems to suggest this will be the case.
• Maximum claims. It seems likely that any earnings received from part-time work would be deducted from the current maximum thresholds. For example, an employee returning to work on 40% of their contractual week would be entitled to receive the difference between those earnings and 80% of their regular wages up to the £2,500 cap.

One possibility is that the scheme will only be extended to employers who actually provide employees with some working hours. From the government’s perspective, this would avoid the unfavourable outcome of businesses being incentivised to continue to claim the full grant without providing any working hours at all.

This makes it an immediate concern for businesses to understand what respect of sharing the costs of continuing to furlough employees will fall on them. Specifically, they will want to know what percentage of salaries they will be required to contribute to the scheme.

What should employers do now?

In the meantime, employers can use the news of the furlough scheme extension to think proactively about the next stage of their business continuity plans. Depending on what existing agreements businesses have in place, they may need to extend the furlough period if they wish to take advantage of the scheme up until 31 July 2020 or beyond.

A key consideration for businesses taking advantage of the scheme who have been topping up employees’ salaries will be whether they can feasibly continue to do so on a long-term basis. Given the downturn in trading many businesses are experiencing, they may need to consider proposing a different arrangement to employees. Any change would be likely to require a fresh agreement and may be contested. Businesses whose employees refuse to consent to an extension of furlough, or to a new arrangement amending their salaries, will need to look at other options – see our FAQs on restructuring the workplace post Covid-19 for further details.