Laura Livingstone Partner, Head of Employment
Coronavirus Job Retention Scheme 20/04/2020
On the 26 March 2020, the government published further guidance for the roll out of the Coronavirus Job Retention Scheme. This guidance was updated again on 4, 9, 15, 17 and 20 April 2020. A Direction to HMRC was also published by the Treasury on 15 April 2020.
While the objective of the scheme is to support employers whose operations have been severely affected by coronavirus (COVID-19), the scheme is also being utilised as a means of ensuring individuals are supported through this difficult time. It is not limited to those employees who would otherwise be made redundant. All you need to show is that the employee is being furloughed “by reason of circumstances arising as a result of coronavirus”.
Claims can be made online and the HMRC portal opened on 20 April 2020. HMRC has confirmed it intends for reimbursement to begin on 30 April 2020. A change announced on 17 April means that the scheme is now set to run until the end of June 2020.
Common questions asked by employers
The latest information regarding the Coronavirus Job Retention scheme can be found at: Guidance: Claim for wage costs through the Coronavirus Job Retention Scheme, Business support and the Treasury Direction. It is important that an employer thinks practically and maintains perspective regarding their short and long-term business needs if considering furloughing employees.
Which employees can you claim for?
The key element is whether an employee is paid through PAYE. Furloughed employees must have been on your PAYE payroll on or before 19 March 2020 and must have been notified to HMRC on a real time information (RTI) submission on or before 19 March 2020. This could cause issues for employees who were not put on the payroll until late February as there may have been no RTI submission for them by 19 March 2020.
The employee can be on any type of contract, including; full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts. It will also cover some members of an LLP. The government has confirmed that Apprentices can be furloughed in the same way as other employees, meaning that they can continue their training provided they do not generate income for their employers. Employees on all categories of visa can be furloughed.
As an anti-fraud measure, the government has stated that employees hired after 19 March 2020 cannot be furloughed or claimed for in accordance with this scheme.
What about employees who have already been made redundant?
The government has expressly stated the scheme covers employees who have been made redundant or stopped working for an employer in the period between 28 February 2020 and 19 March 2020. You may rehire these employees and place them on furlough leave, even if you do not rehire them before 19 March. These employees must have been on the payroll as at 28 February and have been notified to HMRC on an RTI submission on or before 28 February.
Can I furlough an employee currently on unpaid leave?
If an employee was placed on unpaid leave after 28 February they can be furloughed. Employees placed on unpaid leave before or on 28 February cannot be furloughed until the date on which it was agreed they would return from unpaid leave.
I have employees identified as vulnerable, can I place them on furlough leave?
Yes although see below if they are on sick leave. Employers should ensure that their decisions on who to select for furlough leave are not based on discriminatory criteria, except where such discrimination is likely to be justified – this is in very limited circumstances.
Can I furlough an employee who is on sick leave?
The position on sick leave has become less clear since the Treasury Direction was published on 15 April 2020. However what we do know is that a period of furlough leave cannot commence until Statutory Sick Pay has ended.
It is now not clear what would happen if an employee on furlough leave becomes sick.
What can I claim?
The scheme will provide a grant of the lower of either:
• 80% of an employee’s ‘regular wage’; or
• £2,500 per month.
Plus, the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that reduced wage.
Claiming for an employee’s ‘regular wage’ means disregarding items such as performance related bonus, any discretionary payments such as tips, any conditional payments and any non-financial benefits. It remains unclear whether overtime which is worked with regularity is intended to be covered by the scheme.
An employer can reclaim 80% of compulsory commission subject to the cap (i.e. commission that arises from a contractual scheme). You cannot claim for discretionary commission.
Employers can also claim 80% of fees from HMRC. There is no guidance yet on what constitutes “fees”.
Non-monetary benefits, such as the value of health insurance, cannot be claimed for.
How do I furlough employees?
Employers should consult with their staff and make any changes to their employment contracts by agreement. Direction has confirmed that employers must obtain written agreement (which may be in electronic form) from employees of their furlough status and their agreement to cease all work in relation to their employment, and any other changes to their terms and conditions of employment. This is different from simply notifying employees of their furlough status as was previously stated in the Guidance. This is an important change and some employers may need to take action now to get the retrospective agreement if this was not obtained at the time of furloughing. However even then there is concern that retrospective agreement will not be sufficient. Despite Guidance released on 20 April stating that “there needs to be a written record, but the employee does not have to provide a written response” we would advise following the exact provisions of the Direction and obtaining written agreement from employees to cease work and be furloughed.
Are employers obliged to top up the remaining 20%?
The government does not require the employer to pay the additional 20%. (save for when an employee is on annual leave as set out below). However, most employment contracts will not permit an employer to reduce an employee’s pay. Withholding 20% of an employee’s salary will amount to a breach of contract and unlawful deduction of wages unless the employee consents to a reduced salary. It is expected that employees will consent since furlough leave is a better alternative than unpaid leave, lay-off or redundancy.
What if I have an employee with an irregular income?
If the employee has been employed for a full twelve months prior to the claim, the employer can claim for the higher of either:
• the same month’s earning from the previous year; or
• average monthly earnings from the 2019-20 tax year.
If the employee has been employed for less than a year, the employer can claim for an average of their monthly earnings since they started work.
Can I rotate employees on furlough leave?
Employees can be furloughed multiple times provided that the minimum length of furloughing is three weeks. This means employers can rotate staff every three weeks.
Will employees accrue holiday during furlough leave?
Holiday will continue to accrue during this period.
Can employees take holiday whilst on furlough leave?
The Guidance has confirmed that annual leave can be taken during furlough leave.
What do I pay employees taking annual leave whilst on furlough leave?
Employers must pay employees their normal holiday pay (i.e. 100% of their usual salary) in accordance with the Working Time Regulations. This means that employers must pay the additional amount over and above the amount claimed under the scheme. Despite this welcome clarification on the interaction between furlough leave and annual leave, the government has stated that the policy on holiday pay during furlough is being kept under review. In any event, we would advise employers to pay employees their usual salary whilst on holiday.
What if an employee has a lot of annual leave and limited time to take it due to the coronavirus?
The government has announced proposed amendments to the Working Time Regulations, which would allow workers who have not taken up to four weeks of their statutory annual leave entitlement due to COVID-19 to carry it over into the next two leave years. The balance of 1.6 weeks' statutory leave will not be affected, although it can currently already be carried over for up to a year by agreement between the employer and worker. This will ease the requirements on the employer to ensure that their workers take the statutory amount of annual leave in any one year.
Can I require employees to take annual leave?
During furlough leave, employers should not force employees to take holiday as this is likely to be an abuse of a worker’s rights. The exception to this relates to bank holidays which employees can be required to take during furlough leave and possibly any pre-booked holiday.
I have some employees whose employment transferred after 28 February 2020 under TUPE. Can I place them on furlough leave?
The government has confirmed that new employers are able to claim under the scheme for employees of a previous business who transferred after 19 March 2020 provided the transfer constitutes a relevant transfer under TUPE.
This article was co-authored by Associate, Holly Freuchen.