CORONAVIRUS JOB RETENTION SCHEME - FAQS UPDATED (2 April 2020)
On 20 March 2020 the Government announced its new Coronavirus Job Retention Scheme designed to support employers whose operations have been severely affected by coronavirus.
These FAQs update the version we published on 23 March to reflect the Government’s guidance issued on 26 March 2020 and latest developments.
- When does the scheme run from and to and when does the payment portal go live?
The scheme covers the period of three months from 1 March 2020 but will be extended if necessary.
The portal to access payments from the scheme is expected to go live from the end of April.
- How can employers access the scheme?
Employers need to:
- Designate affected employees as ‘furloughed workers’, and notify employees of this change; and
- submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal.
Unless you have a contractual right to lay off employees you will need to obtain the agreement of the employee to accepting furloughed status – by way of agreed variation to the contract of employment. (see paragraph 10 below).
- What financial help is the Government offering?
HMRC will reimburse 80% of furloughed employees’ usual monthly wage costs, up to a cap of £2,500 per month plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
Usual monthly wage costs does not include fees, commission and bonuses.
The scheme does not cover:
- National Insurance Contributions and automatic enrolment contribution on any top-up salary over the 80%.
- Employer pension contributions made above the minimum automatic enrolment employer pension contributions.
- Do employers need to top up employee pay to 100%?
Employers can choose to do so but are not obliged to under the scheme.
Only those employees who were on PAYE payroll on 28 February 2020.
The scheme covers:
- full-time employees
- part-time employees
- employees on agency contracts who are not working
- employees on flexible or zero-hour contracts
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
- Which employers are covered by the Scheme?
Any UK organisation with employees including:
- recruitment agencies (agency workers paid through PAYE)
- public authorities
who have a PAYE payroll scheme on or before 28 February 2020 and a UK bank account.
- Public sector organisations
The government expects that the scheme will not be used by many public sector organisations, as the majority of public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak.
Where employers receive public funding for staff costs, and that funding is continuing, the government expects employers to continue to pay staff in the usual fashion and not furlough them. This also applies to non-public sector employers who receive public funding for staff costs.
Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.
- Are there any restrictions on how long employees can be placed on furlough?
Yes. There is a minimum furlough period of three weeks.
- How are usual monthly wage costs calculated under the scheme?
- Fees, commission and bonuses are not included.
- For full time and part time salaried employees- the employee’s actual salary before tax as of 28 February 2020.
- If pay varies and the employee has been employed for at least a year, claim the higher of either: the same month’s earning from the previous year or the average monthly earnings from the 2019-20 tax year.
- For employees with variable pay who have worked for less than a year, employers should claim the average monthly earnings since they began work.
- If the employee only started in February 2020, pro-rate any earnings so far.
Unless there is a contractual right to lay off in the employment contract, employers will need to obtain the agreement of the employee to accept furloughed status by way of agreed variation to the contract of employment. This should be recorded in writing.
- Can an employee insist on being furloughed?
No, it is for the employer to decide who to offer furloughed status to.
- Can the employee continue to work during the furlough period?
No. To be eligible for the subsidy the employee must not undertake work for the furloughing employer though may undertake training.
If the employee already has two employments, they may continue to work for the other employer having accepted furloughed status from the first employer.
- Can the employee volunteer or undertake training during the furlough period?
A furloughed employee can take part in volunteer work or training, so long as they do not provide services to or generate revenue for the employer. However, if workers are required to complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage or National Minimal Wage for time spent training (even if this is more than the 80% of their wage that will be subsidised).
- Can employers furlough workers as well as employees?
No – unless the worker is paid under deduction of PAYE
- If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay
Government guidance currently states that individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby.
If the employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
Employees who qualify for SMP, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.
If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
The same principles apply where the employee qualifies for contractual adoption, paternity or shared parental pay.
- Does holiday entitlement continue to accrue during the furlough period?
- Can you require employees to take holiday during the furlough period?
Provided that you give the necessary notice (at least twice the length of the period of leave that the employee is being required to take) there is nothing in the Working Time Regulations which would prevent this and a requirement to take prorated leave during a furlough period could be included in the letter offering furloughed status to employees.
There are two potential problems with such an approach.
First, government guidance is currently completely silent on the question of holidays and it may be that further guidance prohibits this approach. In particular until the portal is up and running it is not known what eligibility criteria may be introduced at that stage and it is possible the government will as a matter of policy only reimburse for furlough periods when employees were not taking working time leave.
Secondly, employees may later seek to argue that annual leave on furlough cannot be working time leave as it does not amount to time off work as not providing them with the necessary rest and relaxation.
We are afraid we are in uncharted territory here and can only advise that requiring leave to be taken during furlough is a possibility with some risks attaching.
- Can employees carry over leave untaken because of having to work in the national effort against coronavirus?
The Working Time (Coronavirus) (Amendment) Regulations 2020 provide that workers who have not taken all of their statutory annual leave entitlement due to COVID-19 will be able to carry it over into the next 2 leave years.
- Can an employee currently on sick leave, self-isolating or shielding be brought into the furlough scheme?
Employees on sick leave or self-isolating should get Statutory Sick Pay and/or company sick pay in the normal way, but can be furloughed after they are fit to return to work or the period of self-isolation ends.
Employees who are shielding in line with public health guidance can be placed on furlough.
- Can a furloughed employee take sick leave/claim sick pay while on furlough leave?
- Do employers need to collectively consult with recognised trade unions or employee representatives on furlough proposals if 20 or more employees are affected?
The starting point is that the obligation to carry out collective consultation with representatives arises when an employer proposes to dismiss 20 or more as redundant at one establishment in 90 days or less. Redundancy for the purposes of the consultation legislation has a wide meaning (wider than under the Employment Rights Act) and is defined as a dismissal "for a reason not related to the individual concerned”. Hence under this wide definition, where an employer proposes changes to employees' terms of employment through termination and re-engagement, the proposed dismissals will count as redundancies and trigger the collective consultation obligation. As the furlough scheme involves a change to terms and conditions, the issue of collective consultation arises to be considered.
Where furlough requires agreement, the key issue is whether there is nonetheless a proposal to dismiss? A proposal to dismissal means something less than a decision but more than a mere contemplation of the possibility of redundancies. Before the duty to consult arises, the employer's decision-making process must be sufficiently well advanced to have identified the fact that over 20 employees would be dismissed. If therefore the furlough announcement is put in blunt terms that “if you do not agree to furlough then you will be dismissed as redundant” or similar, then the duty to consult collectively would be likely to be engaged even though you were seeking agreement to furlough. If, however, the position is put so as to make it clear there is no proposal to dismiss then the duty is unlikely to be engaged. If you are considering imposing furlough without agreement please contact us to take specific legal advice.
It is best ER practice to consult on your furlough proposals.
Cater Leydon Millard
2 April 2020
This FAQ document provides general guidance only and expert advice should be sought in relation to any particular circumstances.