The Job Retention Scheme: Your questions – answered
UPDATE – On 12 May April 2020, the government again updated its guidance on the Coronavirus Job Retention Scheme (CJRS), announcing its extension until the end of October 2020. 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.
On top of this the Government will pay National Insurance and employers compulsory 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. The furlough period must be for a minimum of three weeks.
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.
The furlough leave itself must be taken in minimum blocks of three weeks. There is nothing to prohibit employees from being taken off furlough and placed on it again.
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 moths to run until the end of October 2020.
There will be no changes until the end of July. However, from August onwards (until October 2020), the scheme will continue on the basis that furloughed employees can be brought back part-time.
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. Further details on how this will work in practice are to be announced in due course.
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. The employee will, however, pay tax on the salary (if earnings are above the taxation threshold).
However bonuses are not included, nor are non-cash payments or non-monetary payments such as benefits in kind and salary sacrifice schemes that reduce an employee’s taxable pay. It is up the employer if they wish to continue paying these elements.
HMRC has now provided more detail on what is and is not included.
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% of compulsory contractual commission on past sales back from HMRC. Past overtime payments can also be reclaimed.
Does the 80% 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%.
Will employers need to top up the contribution (i.e. pay the other 20% to the employee)?
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).
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.
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% 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% 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 can re-employ them, put them on furlough and claim for their wages from the date on which you furloughed them, This applies even if you do not re-employ them until after 19 March 2020.
Anybody who was on the payroll on 19 March 2020, and has since been made redundant or they stopped working for you, can be rehired and put on the scheme.
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 lay off 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.
This is a fluid situation and we will be providing updates as they become. To discuss any aspect of furlough leave or other employment related matter please contact Philip Pepper or a member of your local employment team.
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