The Flexible Furlough Scheme: Bringing people back to work gradually

When the Coronavirus Job Retention Scheme (commonly known as furlough) was introduced back in March, it was all or nothing: furloughed staff were not able to do any work or provide any services to their employer.

From 1 July, employers have been able to take advantage of flexible furlough, allowing furloughed staff to do some work whilst still being able to claim under the scheme for hours not worked.

Furloughed staff can be brought back for any number of hours on any work pattern. They must be paid by the employer for the work they do. The employer can claim the 80% furlough grant for wages that would be paid for the difference between hours actually worked and “usual hours”. So if staff usually worked 35 hours per week but will be working 7 hours, the grant will cover 80% of 28 hours’ wages. The calculation of usual hours can be complex, particularly when hours previously varied. HMRC has published guidance and worked examples on how to do this.

It is no longer possible to furlough staff who have not previously been furloughed, unless they are returning from parental leave or a period of time called out as an armed forces reservist (and other staff have been furloughed). So this scheme can’t be used to subsidise reductions in hours. It is designed to bring furloughed staff back gradually, when there may be some work for them but not as much as they had before March 2020.

To take advantage of flexible furlough, employers will need to enter into a written agreement with staff. This agreement should cover the basis on which staff will work and be paid, and any agreed deductions from wages for the hours they will not work (i.e. to cover situations where it is agreed that staff will only receive the 80% of usual salary or maximum £2500/month).

From 1 August, employers will need to start contributing more to the costs of keeping staff on furlough, whether full time or flexibly. The grant will no longer cover NICs or pension contributions from 1 August, and will reduce to 70% of reference salary from 1 September, then 60% from 1 October. Employers will have to top up salary to at least 80% or £2500 per month, whichever is lower.

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