Coronavirus Job Retention Scheme – Update
With another update from the Government in the last few days, we have some further clarification on the furlough scheme for you. Gaps remain, although we have some more detail on what you can claim. Here’s a snapshot of what you can and can’t claim together with additional details of the Scheme. For our previous updates on furlough please see Furlough Leave and Furlough Leave – The Latest.
What can we claim for?
- 80% of your employees’ wages up to a maximum of £2,500, this includes people on the minimum wage
- Minimum automatic enrolment employer pension contribution on the subsidised wage
- Employer National Insurance contributions on your furloughed employees pay
What is included in the calculation of employees’ wages?
- Past overtime
- Fees and compulsory commission payments
What is excluded from the calculation of employees’ wages?
- Discretionary bonuses
- Discretionary commission payments
- Non-cash payments
- Taxable benefits in kind
- Benefits provided through salary sacrifice e.g. pension payments
Note – HMRC has agreed that Covid-19 counts as a life event that could warrant changes to salary sacrifice arrangements
What isn’t covered?
- Apprenticeship levy
- Student loans
- Additional National Insurance of pension contributions you make to top up employees’ salaries
- Any pension contributions that you make above the mandatory employer contribution
Can I furlough apprentices?
Apprentices can be furloughed in the same way as other employees and they can continue to receive training whilst furloughed.
However, you must pay your Apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means you must cover any shortfall between the amount you can claim for their wages through this Scheme and their appropriate minimum wage.
Can I bring back employees who were made redundant or stopped working for us after 28 February?
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 through the Scheme. It is important to note however, you are not obliged to do so. So, for example, if you dismissed an employee for gross misconduct then you are unlikely to want them to return. Also consider the basis on which you bring them back – is this just a delay to their termination date or are you bringing them back permanently? Our advice is to restrict the re-engagement to delaying their termination date. Otherwise, if you bring them back permanently and you do not need them after the crisis, you will potentially be faced with having to dismiss them for a fair reason at some point in the future and giving them notice.
We appointed a new employee after 28 February, so we can’t furlough them. If their former employer takes them back to furlough them, what should we do about their contract with us?
Whilst not covered in the updated guidance we consider you have three choices. First you could delay the start date or, secondly, temporarily lay off the employee (but only if that’s provided for in their contract of employment.) Your third choice is to dismiss them if there is a genuine redundancy situation. Talk to us about putting together the least risky process for your business.
Can we claim for employees who are shielding?
You can claim for furloughed employees who are shielding in line with public health guidance (or need to stay home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.
How about employees with caring responsibilities?
Employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed. For example, employees who need to look after children can be furloughed.
Are agency workers (including those employed by umbrella companies) covered?
Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this Scheme, including where they are employed by umbrella companies.
Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advisable to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients.
Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.
Can my staff work for another employer whilst on furlough?
In a surprising development, the Government has confirmed that employees on furlough can work for another employer, provided their contract of employment does not prevent this. We expect that this is most likely to be a Government initiative to give employees an incentive to provide essential work as a key worker during the pandemic. You can agree to vary a contract (provided you do this in writing) to allow a furloughed employee to work for another employer, but you are under no obligation to do so.
Do we need a written agreement?
As we expected the Government has confirmed that Employers must notify employees of their furlough status in writing (the previous guidance did not require it be in writing) and keep the record of that written notification for five years. Our best advice is to make sure that you also have the employee’s agreement to furlough in writing. Please let us know if you would like our help with the necessary documents
Do we have to give them notice to come back to work?
We’ve been asked whether employers need to give notice to bring a period of furlough to an end. There’s no Government guidance on this as yet meaning there is no legal requirement to give them notice to return. It is always good practice to keep in touch with your employees and we would advise giving them a week’s notice if possible, so that they can plan in advance for their return
What do we do about the bank holidays coming up?
There is currently no Government guidance on whether employees can be on annual leave and furlough leave at the same time, or how any holiday pay should be calculated..
Where bank holidays are included in an employee’s holiday entitlement under their contract, the safest options for the employer would be either to pay the employee as usual for bank holidays that fall during the period of furlough, or to allow the employee to take a day’s annual leave at a later date.
However, as we have advised previously on annual leave pay, case law makes it clear that the whole purpose of normal holiday pay is to ensure that employees aren’t discouraged from taking holiday by being paid less when they’re on holiday than when they’re at work, or — as it would be — on furlough. That suggests that the 80% pay rate under furlough for bank holidays will be adequate because they’re not being discouraged from taking holiday because they’re being paid the same as they would be if they were on furlough. Some advisers take the view that the current crisis is such that there is no meaningful ability to take a holiday, particularly because travel is so circumscribed, thus employees should not be required to use their annual leave. However, our view is that in practical terms it is difficult enough for employers to stay afloat at the moment, let alone be faced with large amounts of accrued holiday to be taken by employees when the crisis is over.
Our view is that this is a new world entirely and the government has yet to clarify the position, so asking employees to take at least some of their holiday while on furlough and being paid at the 80% rate is a reasonable approach for now. If the legal position is clarified later on you can, of course, rectify employees’ pay or holiday allowance at a later date.