COVID-19: Daily Update – Coronavirus Job Retention Scheme
Further guidance has been released in relation to the furlough support package for employees (the Scheme). Basic details of the Scheme can be found HERE and details of additional information and clarity provided by the government on 26 March can be found below:
- Businesses wishing to designate certain employees as ‘furlough workers’ will need to agree this with the employee, as well as any reduction in wages to at least 80% and any amendments to their benefit entitlements. To be eligible for reimbursement employers should also write to their employee confirming the arrangement and keep a record of this communication.
Furlough leave interacts with other instances of leave in the following ways:
- Employees on unpaid leave cannot be furloughed unless they were placed on unpaid leave after 28 February.
- Employees on sick leave or self-isolating cannot be furloughed but are entitled to sick pay and can then be furloughed afterwards. It is uncertain whether employees who fall sick during their furlough leave should be entitled to sick pay or their furlough leave pay, however, as furlough leave needs to be taken in blocks of three weeks the employee becoming sick should not change their designation as a furlough worker.
- Extremely vulnerable employees who are ‘shielding’ can be furloughed and are entitled to SSP if not furloughed.
- Other vulnerable people can be furloughed but would not be entitled to SSP if not furloughed and deciding not to attend work.
- Employees on maternity, contractual adoption, paternity, or shared parental leave continue to be entitled to mandatory leave provisions and Statutory Maternity Pay (or equivalent). Contractually agreed enhanced payments can be considered as wage costs and be reimbursed by the Scheme which suggests, though not expressly stated, that these employees can be furloughed so long as their statutory rights remain unaffected.
- The further guidance is silent on the interaction between furlough and paid annual leave and as such there is no reason to believe furlough leave and annual leave cannot overlap. The update that unpaid leave taken after 28 February is not inconsistent with furlough leave would suggest this may be the government’s understanding.
- Employers should be careful not to discriminate when deciding which employees to furlough. Using a simple and objective matrix system may the easiest option, however, it may be acceptable to prioritise elderly and disabled employees under reasonable adjustments and legitimate aim reasoning.
- Employees with multiple jobs can be furloughed separately for each job.
- While a furloughed worker is prohibited from generating revenue for the employer they can volunteer elsewhere or engage in training.
- Furloughed workers must be furloughed for a minimum period of three weeks. There is no reason employers cannot stagger furlough leave in order to maintain an operational workforce and as of yet there is no reason to believe furloughed workers cannot be taken off of furlough leave and placed back onto it so long as the three week minimum is satisfied.
- Furloughed workers are still employed by the business and are still entitled to be paid and receive benefits as usual, save for any variations agreed between the parties such as reducing the salary to 80%. The Scheme reimburses the employer for 80% of the furloughed worker’s usual monthly wage costs up to £2,500 PLUS associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions. Employers will not be reimbursed for NICs or pension contributions payable on wages paid beyond the amount recoverable under the Scheme nor any voluntary automatic enrolment contributions above the 3% minimum. Fees, commission and bonuses are NOT included.
- In order to be eligible for reimbursement under the Scheme the employer must pay the lower of 80% of their usual wage or the £2,500 to the employee per month as a minimum. This clearly instructs employers not to reduce employee wages below 80% if they want to be reimbursed by the Scheme.
- Employers must have a PAYE payroll scheme predating 28 February 2020 and have a UK bank account. Furloughed employees also need to have been on this PAYE payroll prior to 28 February 2020. So long as these conditions are met, and the employee does not undertake any work, those who have been made redundant since 28 February 2020 can be rehired and placed on furlough leave. Other employees hired after 28 February 2020 cannot be furloughed and their wages cannot be reimbursed under the Scheme.
- Administrators can access the Scheme for support employees of companies that are under administration.
- Where an employee’s wages vary from month to month and has been employed for at least a year the employer can claim the higher of (1) the employee’s same month’s earning from the previous year; or (2) their average monthly earnings from the 2019-20 tax year. Where the employee has been employed for less than one year the employer will need to calculate average earnings over the period worked and the additional NICs and pension contributions.
- The government considers that employees are only entitled to the National Living Wage and National Minimum Wage for hours they actually work and so these minimums will not apply where the individual is furloughed. However, employers can require furloughed workers to complete online training courses which would trigger their entitlement to national living/minimum wage for those hours, even if this is more than the 80% which will be reimbursed.
Details needed to make a claim:
- your ePAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 weeks)
- your bank account number and sort code
- your contact name
- your phone number
- Claims for Scheme reimbursement can be made once every three weeks and can be backdated to the 1 March if applicable.
- Claims should be made at the point at which payroll is completed or in advance of an imminent payroll.
- Payments claimed by businesses are to be treated as income for calculation of taxable profits.
- Once the Scheme is closed furloughed workers can either return to work with the same rights they were entitled to prior to their furlough leave or the employer can consider redundancy.
For further information on the Coronavirus Job Retention Scheme and support implementing it please contact our employment team.
Claire Knowles – Partner
Mark Alaszewski – Associate
Rebecca Mahon – Solicitor
Adam McGlynn – Trainee Solicitor