FAQs on the Coronavirus (COVID-19) Job Retention Scheme (“the Scheme”)
On 20th March 2020, the Government announced a package to assist employers amid the COVID-19 pandemic, the package is known as the Coronavirus Job Retention Scheme, or “Furlough”. It is a temporary scheme, which allows employers to place employees on a temporary leave of absence in order to preserve jobs. Importantly, employers are able to claim up to 80% of an employees’ wages (subject to a maximum of £2,500 per month), to encourage retention of staff during this uncertain time.
Details of the Scheme have been announced, clarified, updated and clarified again! We have set out some of the most common questions and answers that we have received about the Scheme to try to provide you with as much information as possible. Please note that this guidance is only up to date as of 15th April 2020, so please refer to the Government’s website for up to date changes, as guidance on this area is changing regularly.
Details about the Scheme
- How long will the Scheme be in place for?
The Scheme is temporary. At the moment, it is open to employers for at least 3 months, starting from 1st March 2020 and ending on 31st May 2020. It may be extended if necessary.
- What does the Scheme do?
It will allow employers to claim grants of up to 80% of furloughed employees’ usual monthly wage costs, up to a maximum £2,500 per month, plus Employer National Insurance contributions and minimum automatic enrolment employer pension contributions.
- When will the Scheme be set up?
It’s anticipated that the Scheme will be available by the end of April.
- Can claims be backdated?
Yes. Claims can be backdated to 1st March if applicable.
Eligibility for funding under the Scheme
- How do I know if my company is eligible to use the Scheme?
Any UK business, charity, recruitment agency or public authority can use the Scheme as long as they have created and started a PAYE payroll scheme on or before 19th March 2020. They must also have a UK bank account and any PAYE payroll schemes that have been consolidated after 19th March 2020 are still eligible, as long as PAYE payroll schemes were in place as of 19th March 2020.
- Does the Scheme cover part-time employees?
Yes, it covers full-time and part-time employees, as well as employees on flexible, zero-hour or agency contracts.
- Does the scheme cover workers?
It covers anyone paid through the PAYE payroll system, which includes workers who provide a personal service under a contract.
- Does the Scheme cover all employees, regardless of their length of service?
Not quite. To be eligible, an employee must have been on the company’s PAYE payroll on 19th March 2020. If someone started after this date, they are not eligible.
- What if the company has made someone redundant recently?
If the company has made an employee redundant since 19th March 2020, they are able to rehire them and claim under the Scheme. This can be done with the agreement of both parties.
- Can employees do any work whilst furloughed?
No. Employees must not be asked or allowed to undertake any work for their employer. If they even work for an hour (which includes reading and replying to emails!) they are not eligible.
However, an employee can undertake training and do volunteer work, provided they aren’t providing services or generating revenue or business for you. See our note below on an employee’s pay when undertaking any training.
An employee can also take a second job if they are furloughed from their main employer, as long as the second job is with a company or organisation NOT linked to the employer’s company.
- If the business only needs staff three days a week, can they claim under the Scheme for the other two days?
No. Furloughed leave is an “all or nothing” situation. It only applies where there is no work at all and doesn’t apply to a reduction of work and must last for a minimum of three weeks.
- Can self-isolating employees be furloughed?
Unfortunately not. Employees on sick leave or self-isolating cannot be furloughed, and should be paid Statutory Sick Pay (SSP), or company sick pay in line with their contractual entitlements. However, once the employee has completed their period of self-isolation, or is no longer on sick leave, they can be furloughed.
- What if an employee is shielding in line with public health guidance?
Any employees who are shielding under public health guidance can be furloughed.
- What if an employee is worried about catching Coronavirus and decides to self-isolate when they are well and don’t’ have family members with symptoms? Do they get SSP?
No because they are not self-isolating in accordance with the guidance of Public Health England.
- Can employees on unpaid leave be put on furlough?
Only employees who were placed on unpaid leave after 19th March 2020 can be furloughed. This can include employees who are caring for shielding family members or children off school.
- What date can someone be put on furlough leave to, and what date will they return to work?
The Scheme allows an employee to be furloughed, from 1st March 2020, or the date they stopped working after that date, up to 31st May 2020 (as it stands). This means they will return to work on 1st June 2020.
- What about an employee who is on maternity leave?
The normal rules apply in respect of Statutory Maternity Pay. If enhanced contractual maternity pay is offered (earnings related), this is included as wage costs that can be claimed through the Scheme.
This also applies to anyone qualifying for contractual adoption, paternity or shared parental pay.
The guidance doesn’t prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed.
- What about staff on holiday or sick pay?
They should be paid as normal, in line with their contract. If the company can’t afford to pay holiday then they could refuse the period of annual leave, but the holiday will still have accrued for the remainder of the holiday year.
Employees and workers can carry over up to 4 weeks holiday over the next two holiday years, if they are unable to take holiday due to Covid-19.
Whether an employee can be furloughed and on holiday at the same time is open to debate. Contact us to talk about this in more detail.
SSP can be reclaimed by the Government if the company has less than 250 staff.
Conditions relating to furlough leave
- Do companies need to go through a process with employees to put them on furlough leave?
No, but they do need to designate employees as ‘furloughed employees’. Unless the employee has a contractual right to be placed on temporary layoff without pay, companies will need their express consent to being furloughed.
To do this, companies should write to the affected employee confirming that they have been furloughed, and ask for their agreement. Companies should keep a copy of that letter on their personnel file for at least 5 years. If you need a draft letter, please let us know and we can provide one to you.
- What if an employee doesn’t agree to be furloughed?
They could be placed at risk of redundancy and taken through a process, if there is genuinely no work for them to do (due to a business or factory closure/lockdown or because they are unable to work from home). Please bear in mind that if a company proposes to make, or have made more than 20 redundancies in a 90 day period would mean that the process should be a collective consultation.
- What if companies can’t afford a redundancy payment?
Employees can still be taken through a process, but they would need to claim their redundancy compensation from the Redundancy Payments Office.
- What’s the minimum length of time someone can be put on furlough leave?
The minimum amount of time an employee can be put on furlough leave is 3 weeks. This can be extended if necessary, up to 31st May 2020.
- Can employees be rotated to be put on furlough leave?
There is nothing to suggest otherwise at this stage. However, if companies do this, they must make sure that each employee is off for a period of at least three weeks.
- What if 80% of an employee’s normal earnings takes them below the National Minimum Wage?
Individuals are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working. However, they are entitled to be paid the NMW for any time spent training.
No deductions for benefits of salary sacrifices can be made from the 80% or £2,500 cap.
How to and what to claim
- How can companies make a claim?
Companies will need to process a claim via a new HMRC portal, which should be set up by the end of April.
- What information do companies need to make a claim?
You will need to provide HMRC with the following information:
- ePAYE reference number
- total number of employees being furloughed
- the claim period (start and end date)
- amount to be claimed (per the minimum length of furloughing of 3 weeks)
- bank account number and sort code
- contact name
- phone number.
- How much can companies claim?
Companies can claim the lower of 80% of an employee’s regular wage, or £2,500 per month. This will be paid by way of a grant from HMRC directly into the company’s bank account.
This shouldn’t include fees, commission and bonuses when calculating the regular wage amount, unless it includes past overtime and contractual commission.
The grant is calculated based on salary as of 19th March 2020.
- What about employer pension and NI contributions, do companies still have to pay those?
Yes, but companies can claim Employer National Insurance contributions and minimum automatic enrolment employer pension contributions in addition to the grant of 80% salary. The amount recoverable is based on the reduced furloughed pay and not the normal pay.
- Do companies have to pay employees the extra 20% of their salary?
No, this is optional and entirely at the company’s discretion. If they do, they can’t claim any employer contributions on the top-up salary (i.e. on the 20%).
- Some employees don’t have a set wage. How do you work out how much to claim for?
If an employee has been employed for a full 12 months prior to the claim, companies can claim for the higher of either:
- the same month’s earning from the previous year; or
- the average monthly earnings from the 2019-2020 tax year.
If an employee has been employed for less than a year, their wage should be calculated based on their average monthly earnings since they started work.
Any employees that started in March 2020, their earnings are calculated on pro rate basis.
- What will happen after the claim has been submitted?
HMRC will check that companies are eligible for a grant and will pay it via BACS payment to the UK bank account details provided.
- When can claims be submitted?
Claims can only be submitted once every three weeks, so there won’t be a weekly reimbursement.
- Can companies still pay salaries and get paid back by the Government if staff are on furloughed leave?
Yes, companies can either use the grant to be reimbursed for salaries up to 80% (subject to the £2,500 cap) or to back pay staff not being paid.
- What if there is still not enough work to do once the Scheme ends?
Redundancies may need to be considered. Please get in touch with us nearer the time and we can guide you through this.
- Do furloughed employees still have the same employment rights?
Yes. Employees have the same rights including SSP entitlement, rights against unfair dismissal, rights to a redundancy payment and rights related to statutory maternity pay and other parental rights.
- How do companies choose which employees to furlough?
This is a decision to make on the needs of the business. However, companies must be careful not to discriminate in deciding who to offer furlough to. We believe that prioritising vulnerable workers is unlikely to be discrimination, as prioritising them could be justifiable, and those who do not suffer from serious health conditions are not a protected class.
- Can companies continue with a disciplinary or grievance process with an employee of furloughed leave?
Talk to us if this applies to you. Ultimately it’s about being reasonable, delaying to the end of furloughed leave may be seen as a fair thing to do. The process could be seen as “matters associated with employment” and could possibly continue. However, talk to us if this situation applies to you, so that we can check the circumstances that apply.
- Can employees who transferred to another employer after 19th March be furloughed?
Yes. As long as they were employed and on the previous company’s payroll system as of 19th March 2020 and the either the TUPE or PAYE business succession rules apply to the change in ownership.
This is an ever changing area and the position may change. Therefore professional advice should always be taken before any course of action is pursued. The law stated is at 15th April 2020.
If you have any further questions please don’t hesitate to talk to Tollers on 01604 258558…We’re here for you. We will continue to keep you updated if there are further developments and if additional details are released.