As of 1 July, the new version of the Coronavirus Job Retention Scheme came into play. The good thing is that employers can now flexibly furlough their staff – it’s not all or nothing, they can work some of the time and the government will subsidise the times when there’s no work to do. The bad thing is that it’s really complicated.

**To recap two things to begin with:**

- An employee can only be part of the new JRS v2 if they completed an uninterrupted three-week period of furlough under JRS v1 by 30 June.
- The maximum number of employees you can claim funds for in a single month under JRS v2 is the greatest number you claimed for in a single claim in JRS v1.

There’s an exception on both of those where an employee could not meet the qualification for furloughing in JRS v1 as they were on parental leave, but aside from that it’s very simple.

**How does furloughing work now?**

Most things are the same as they were.

For someone who is still completely furloughed, July looks identical to June in every respect – the scheme will reimburse 80% of normal pay, up to £2,500, plus associated National Insurance and statutory minimum employer pension costs.

For someone who comes back to work for good at some point in the month, July is also the same as June – the scheme will reimburse you for costs up to that point on an identical basis, and after that you’re on your own.

If someone comes back to work part-time or on some other sporadic basis, that’s flexible furlough, and that’s where it gets more complex.

**If someone is flexibly furloughed, do they have to have a new formal pattern of working?**

Not at all. You just have to keep track of the hours they do work.

**What can be claimed for an employee if they’re flexibly furloughed?**

The employer must pay the employee’s wages in full for the time they’re working, obviously. That’ll just be in line with their employment contract, and there’s nothing special about it.

JRS v2 will reimburse the employer for the time that the employee is not working. It does that on the basis of “usual hours” – you have to work out the employee’s usual hours and subtract the hours they’ve worked. The balance can be claimed under JRS v2, with the usual 80% restriction and pro-rata £2,500 cap. As with JRS v1, you can top the employee up to 100% if you like, but it’s at your own cost.

**How do I work out an employee’s usual hours? Do I look at how many hours they’d normally have been expected to work in the month in question?**

No, you don’t.

Although historically more or less all payroll calculations have always been done on the basis of actual working days, as with JRS v1 there’s a calendar day system for JRS v2. For an employee with fixed working hours you need to assess the average hours per day in whatever the employee’s “repeating working pattern” is, then multiply that by the number of days in the month. For an employee with variable pay, it's more complicated.

The best way to illustrate it is just with some examples.

**Example 1 – an employee with fixed weekly hours**

Imagine someone who works full time and does a 35-hour week, 7 hours a day Monday to Friday. They have a repeating working pattern that’s seven days long. That works out as five hours per day (35 divided by 7). For July, their usual hours for flexible furlough purposes will be 155 - 5 hours multiplied by the 31 calendar days in July. They wouldn’t really have worked 155 hours if they’d not been furloughed, because of the way the weekdays fall – there are 23 weekdays in July so they’d have worked 161 hours (7 hours multiplied by 23 working days), but that doesn’t matter. It’s a strict calendar day calculation.

**Example 2 – an employee with fixed hours who works every other Wednesday**

You might, though, have an employee who does a 6-hour day on Tuesday and Thursday every week, along with every other Wednesday. Their repeating working pattern is a fortnight, and they work 30 hours in that time. That works out as 2.14 hours a day. So, for July their usual hours for flexible furlough purposes would be 67 – 2.14 hours multiplied by the 31 calendar days in July, rounded up (if it’s a monthly payroll) to the nearest whole number.

By the way, as with JRS v1, you look back to the contract the employee had prior to 19 March in order to assess their contracted hours.

**Example 3 – an employee with variable hours, not fixed ones**

For staff on variable hours, the system for figuring out their usual hours is very similar to the one you used to work out “normal pay” under JRS v1. You look back to 2019-20, and their usual hours for the month will be the higher of:

- Their average hours in 2019-20 (up until the point they were furloughed, if that was prior to 5 April).
- The hours they actually worked in the same calendar month last year.

"Average hours" here means average hours worked per day (that the employee was on the books) in 2019-20, multiplied by the number of calendar days in the month you're working out their pay for now. So, if someone was on your payroll all through 2019-20, wasn’t furloughed until after 5 April, and worked 684 hours in the year, that’s 1.87 hours a day. Usual hours for July 2020’s 31 days would therefore be 58. But if they did more than 58 hours in July 2019, you’d use that bigger total instead as their usual hours for July 2020.

The calculations become more complex still if the pay period is not a calendar month. We’re very happy that nearly all the payrolls we run are for the calendar month!

**How much must I pay the employee for the flexibly furloughed hours?**

Again, you need to go back and look at last year’s pay.

If our employee from example 3 did fewer than 58 hours in July 2019 and therefore those hours don’t take precedence, their usual hours for the July 2020 calculations are 58. If they actually worked 31 hours, you’ll just pay for those as normal. For the other 27, you look back to 2019-20, and find the higher of:

- Their average monthly pay in 2019-20, or
- Their pay in the same calendar month last year.

Whichever is the higher, you take 27/58ths of it, and 80% of that is the amount that they must be paid, and that HMRC will reimburse. As ever, you can top up with the extra 20%, but at your own cost etc.

As with JRS v1, it doesn’t matter if that’s less than National Minimum Wage.

**How are the claim amounts going to change over time?**

At present, if you’re paying the furloughed employee 80% of normal pay, then the government is covering the lot. Your employee is still accruing holiday entitlement, but that’s the only real cost to you. However, the support is being tapered away. Here’s what can be claimed:

July is just the same as June: 80% of salary (up to a monthly equivalent of £2,500) for the time on furlough, plus Employer’s National Insurance and minimum statutory pension contributions for that time.

August: Just the 80% of salary (capped at £2,500). You’re on your own with the pension and NI.

September: Just 70% of that salary. You still have to pay at least 80%, so the extra 10% is now out of your pocket, along with the pension and NI.

October: Just 60% of that salary. You still have to pay at least 80%, so the extra 20% is now out of your pocket, along with the pension and NI.

At least that means that the claims get somewhat simpler from August onwards, since two of the three components drop out! Perhaps we should be grateful for small mercies.

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