Guides & Advice
The Job Retention Scheme | your questions answered
The Job Retention Scheme | your questions answered
UPDATE – On 30 July 2020, the government announced that furloughed workers who lose their jobs will be eligible for redundancy pay, and statutory notice pay, based on their normal wages - not the furlough rate.
We’ve updated our FAQs and laid out the commonly asked questions, and answers, about the concept of “Furlough Leave” and how you may be able to utilise this to keep your business going and retain staff during these difficult and unprecedented times based on current guidance available.
What is Furlough Leave?
Furlough leave is a completely new job retention scheme announced by the Government which allows employers to retain staff while they address any economic downturn as a result of COVID-19.
The Government will pay up to 80% of the wage costs (subject to a cap of £2,500) of any employees who are designated as furloughed, up until the end of August 2020.
From September 2020 Government contributions to wages under the furlough scheme will be reduced to 70% (up to a maximum of £2,187.50) with employers paying at least 10% of wages, and;
From October 2020, Government contributions to wages will reduced further to 60% (up to a maximum of £1,875), with employers paying 20%.
On top of this the Government will pay National Insurance and employers compulsory pension contributions until the end of July 2020 but from August 2020 onwards employers will have to pay employer national insurance and pension contributions. Furloughed employees are those who have been designated as having no work to do (i.e. will remain at home and do not have the requirement to complete any tasks) but who will be retained by the employer.
An employee is allowed to take part in volunteer work while furloughed, as well as training, so long as the work does not provide services to or generate revenue for, or on behalf of your organisation.
Until 1 July 2020, the furlough period must be for a minimum of three weeks. After that, ‘flexible furlough’ will apply and there will be no minimum time that a worker can be on furlough leave. However, when submitting a claim to HMRC to recover furlough wage costs, the claim must cover a period of at least seven calendar days, unless a claim is being made for the first or last few days in a month.
Employees who are union or non-union representatives may also undertake duties and activities for the purpose of individual or collective representation of employees, or other workers, whilst furloughed. This is on the condition that they do not provide services or generate revenue for the employer.
How long will it last?
The scheme, initially announced to run from 1 March for three months has, as of 12 May 2020, been extended by a further four months to run until the end of October 2020. Due to changes being applied to the scheme over the coming months, 10 June 2020 was the last date any employees could be placed on furlough.
There will be no changes until the end of July. However, from July 1 onwards (until October 2020), the scheme will continue on the basis that furloughed employees can be brought back part-time, whilst also remaining on furlough part time. This will be known as ‘flexible furlough’.
The Chancellor has confirmed that workers will, through the combined efforts of government and employers, continue to receive the same level of support as they do now, at 80% of their salary, up to £2,500, until the end of August 2020, when employers will be required to contribute to the wages of employees.
What is the new 'Jobs Retention Bonus'?
The new scheme will see a £1,000 bonus paid to businesses for each employee brought back from furlough leave, with the condition that the employee remains in continuous employment with the company until at least January 2021, and be paid at least £520 on average in each month from November to the beginning of next year. We will publish further guidance and clarification on the bonus scheme as more details are announced.
Can you make employees redundant during furlough?
Even with all the financial support available, it is inevitable that COVID-19 will force some employers to make a number of their employees redundant. However, employers must ensure that their HR teams have all the resources and support they need.
To protect people’s livelihoods, on 30 July 2020 the government announced that employees who are made redundant while on furlough leave will be eligible for redundancy pay based on their normal wages - not the furlough rate.
The new legislation will also apply to statutory notice pay, so that statutory notice pay is also based on normal wages, rather than the lower furlough wages.
Who does the Job Retention Scheme apply to?
The scheme is available to all UK employers, regardless of size, including businesses, charities, recruitment agencies (where agency workers are paid through PAYE) and public authorities. Guidance on how to claim can be found on the gov.uk website.
The scheme does not apply to the self-employed. There is a separate scheme available for self-employed individuals. HMRC will contact the self-employed directly.
What does the contribution include?
The guidance states that the Government will contribute towards all wages costs, meaning that the contribution includes costs such as employer pension and national insurance contributions up until the end of July 2020. From August 2020 employers will have to pay these contributions. The employee will, however, pay tax on the salary (if earnings are above the taxation threshold).
Is commission included in the money that employers can claim back from the Government?
Yes. In addition to basic salary, the guidance states that an employer can reclaim 80% (or 70% or 60% from September 2020 onwards) of compulsory contractual commission on past sales back from HMRC. Past overtime payments can also be reclaimed.
Does the 80% (or 70% or 60% from September 2020 onwards) include non-monetary benefits such as health insurance or a car allowance?
No. The guidance expressly states that these costs cannot be reclaimed as part of the 80% (or 70% or 60% from September 2020 onwards).
Will employers need to top up the contribution (i.e. pay the other 20% to the employee)?
Until 1 September 2020, an employer can choose to top up to 100%, but does not have to (subject to general employment law and the renegotiating any contractual entitlements). From 1 September 2020, employers will have to pay 10% of wages with the CJRS paying 70%, and from 1 October 2020, employers will have to pay 20%, with the CJRS paying 60% (subject to the various caps on wages).
Which employees will be eligible for furlough leave?
To be eligible, the employee must have been on the payroll on 19 March 2020. If they were hired after this, they will not be eligible.
The job retention scheme is not just limited to those who would otherwise have been made redundant. Rather, eligibility is not so prescriptive as to require a drop off in work akin to a redundancy situation. The focus is on the business’ operations being severely affected by coronavirus, with this impact clearly varying significantly from one employer to another.
As stated at paragraph 6.7 of the guidance, the employer and employee will need to agree in writing for the employee being placed on furlough. In terms of payments, the employer can claim for earnings, which it reasonably expects to be paid.
Employees who are self-isolating or on sick leave, cannot be placed on furlough leave, but can be placed on furlough leave afterwards. Employees on maternity leave should continue to receive maternity pay, but can agree to return early and be placed on furlough leave. The government confirmed on 9 June that employees who return to work in the coming months after being on statutory maternity and paternity leave, will be permitted to be furloughed (even after the 10 June end-date for new entrants). However, this will only apply if their employer has previously furloughed other employees.
Revised furlough scheme- July 2020 onwards
As detailed above, from 1 July 2020, furloughed employees will be able to return to work on a part-time basis. Employers will have to pay full salary for hours worked and can claim under the CJRS for hours not worked, subject to the relevant caps. The number of employees for whom a claim can be made under the new scheme is limited to the maximum number claimed for in a single claim under the old scheme (i.e. for the period up until 10 June 2020).
When claiming under the new scheme, the claim must cover a period of at least seven calendar days (unless the claim is being made in the first or last few days in a month). However, subject to compliance with this when submitting the claim to HMRC, under the new scheme, employers are able to furlough employees for any amount of time and any shift pattern. As before, employers will need to agree in writing any flexible furlough with the employee.
Non-working days or hours will count as ‘furloughed days/hours” and no work can be undertaken on said days. There are a number of record keeping requirements under the new scheme, namely that: the furlough letter confirming the basis upon which the employee agrees to ‘flexible furlough’ must be kept for five years. Employers also have to keep records for six years of the amount claimed and the period of the claim for each employee; the calculation details and reference numbers; and the usual hours worked, the actual hours worked and the number of hours employees are furloughed for.
This accurate record keeping is key to the operation of flexible furlough, and the guidance makes clear that employers should only make a claim when ‘you have certainty about the number of hours your employees are working during the claim period’. Furloughed hours will ultimately be the difference between an employee’s usual hours and the actual hours worked, even if this is different to what was agreed when the flexible furlough was implemented.
Can apprentices be furloughed?
Yes, apprentices can be furloughed, however, employers must pay apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage as appropriate for all the time they spend training. This means employers must cover any shortfall between the amount they can claim for the wages through this scheme and the appropriate minimum wage.
Can company directors be furloughed?
Yes and while on furlough leave, company directors can still perform their statutory duties, relating to the filing of his/her company’s accounts or providing other information that relates to the administration of the director’s company. They cannot carry out any other work for the company if furloughed. The guidance also confirms that company directors with an annual pay period can benefit from the scheme, as long as they meet the relevant conditions.
Can furloughed employees take another job?
Yes. Employees can start a new job when on furlough leave (meaning they might end up earning 80% (or 70% or 60% from September 2020 onwards) of the old salary and 100% of a new one). Whilst this was not prohibited in previous guidance, the latest guidance expressly allows it. Employees will however have to check that their contractual terms allow them to start a new role, and seek approval if necessary.
What about staff without guaranteed hours and those on the minimum wage?
For employees whose pay varies, the employer can claim for the higher of (a) the same month’s earning from the previous year (e.g. earnings from March 2019); or (b) the employee’s average monthly earnings in the 2019-20 tax year.
Individuals are only entitled to the minimum wage for the hours they work. So where staff are furloughed – and therefore cannot work – they will still be limited to 80% (or 70% or 60% from September 2020 onwards) of their normal earnings even if this results in their pay being below the minimum wage based on their normal working hours. However, they are entitled to be paid national minimum wage for any time spent training.
What if employers have already dismissed staff?
If you made employees redundant, or they stopped working for you on or after 28 February 2020, you would have been eligible to re-employ them and put them on furlough as long as you did this by 10 June. You can claim for their wages from the date on which you furloughed them, even if you did not re-employ them until after 19 March 2020.
What if employees refuse furlough leave?
If an employee refuses furlough leave, normal employment rules will apply, i.e. if there is no work for that employee to do, employers could choose to make them redundant. If there are contractual layoff or short time working provisions in the contract, these could also be applied.
Our blog on redundancies during COVID-19 provides guidance on the correct processes
and how to deliver redundancy news while working remotely.
What if an employee wants to be placed on furlough leave, but employers want to retain them as normal?
If an employer has work for an employee to do (albeit at home), provided that employee does not fall within one of the vulnerable categories (which may result in them being entitled to sick pay) and remains fit and well and is able to do their job, the refusal to carry out their role is a potential disciplinary issue and should be dealt with in the usual way.
Can employees be forced off furlough by their employers? If so, how exactly could this happen?
The furlough scheme has not altered basic employment law principles. Any variation in the terms on which someone is employed requires consent from both parties. When employees commenced furlough, their employer may well have set out in advance the conditions under which that period of furlough would come to an end – possibly a specified date or possibly by way of notice being served by the employer. In those situations, employees can be forced off furlough in accordance with what has already been contractually agreed. However, in the absence of any such provisions, an employer will need to secure the employee’s consent in order to bring the period of furlough to an end.
Can an employee take holiday during furlough leave?
Yes, Employees continue to accrue holiday whilst on furlough leave and can also take holiday during furlough leave. The Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay, so employers will be required to top up the pay to 100% for the holiday period.
Note that employers do have flexibility over when employees can take holiday in line with the requirements of the Working Time Regulations.
What about employees who have TUPE transferred?
TUPE (Transfer of Undertakings (Protection of Employment) Regulations 2006) governs the transfer of employees from one organisation to another. Previously it was unclear whether new employers could benefit from the coronavirus job retention scheme if the employees transferred after 28 February 2020. However, the guidance now states that a new employer is eligible to claim in respect of employees of a previous business transferred after 28 February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.
If you have any queries on the furlough leave scheme, or need any guidance or support, speak to a member of your local employment team.
As the furlough scheme starts to gradually wind down, and the restrictions around social distancing continue, you’ll also need to consider what adjustments need to be made before bringing your employees back into the workplace. Our guide to recovery and resilience addresses those key people-related questions, challenges and opportunities.
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