The Coronavirus Job Retention Scheme (Furlough)
Please note that while official guidance about this scheme was released on 26 March 2020, there are still many unanswered questions about how the scheme will operate at the time of this release.
We will make further information available to our clients as and when it becomes available.
1. What is the Coronavirus Job Retention Scheme?
-The scheme was announced by the Chancellor of the Exchequer on Friday 20 March 2020. It enables employers of workers whom they have sent home due to lack of work to apply to HMRC to be reimbursed in respect 80% of the employee’s usual monthly wage costs, up to a maximum of £2,500 per month. The official guidance is available at https://www.gov.uk/guidance/claim-for-wage-costs-through-thecoronavirus-job-retention-scheme
2. Who can claim?
-Any UK organisation with employees can apply, providing they have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
3. How long does the scheme run for?
-The scheme runs initially from 1 March 2020 for three months. The Chancellor has indicated a willingness to extend the scheme for a longer period if necessary.
4. How can we access payments?
-HMRC are going to administer the scheme and are in the process of setting up a system to facilitate the payments. You can only submit one claim every three weeks.
5. What do we need to do to be eligible for the scheme?
-HMRC advises that you will need to: • designate affected employees as ‘furloughed workers,’ and notify your employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC will set out further details on the information required) You will also need: • 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 • You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
6. Can we impose furloughed status on an employee?
-No, you will need the employee’s agreement, ideally in writing. HR Heroes will be providing Furlough Agreements for clients.
7. How much exactly can we claim?
-Where someone earns no more than £2,500 per month gross, you will be able to claim 80% of their gross monthly wage. Where someone earns more than £2,500 per month, this is the maximum that you will be able to claim. For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included. If the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either: • the same month’s earning from the previous year; or • average monthly earnings from the 2019-20 tax year If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. You can also claim employer’s national insurance contributions and the minimum employer autoenrolment pension contributions.
8. What should we pay a furloughed employee?
-You should agree with the furloughed employee what they will be paid, and set this out in a furlough leave agreement. You may agree to pay them only the sums reimbursed by HMRC (as above). Alternatively, you may agree to top up their payments for some or all of their furlough leave. It does not matter if furlough pay takes an employee below the minimum wage, since the employee is not carrying out any work (subject to the below regarding training).
9. What if I laid off an employee or made them redundant prior to the announcement of the scheme?
-You will be able to retrospectively claim on behalf of anyone who has been sent home due to lack of work since 1 March 2020, as long as you keep them in your employment. You can also retrospectively change the status of someone you have dismissed for lack of work since 1 March 2020 to that of a furloughed employee, with their agreement.
10. What if an employee started after 1 March 2020?
-They would not be eligible to be furloughed, insofar as you would expect to be reimbursed by HMRC. If you have previously furloughed such an employee believing the scheme would permit this, you would now need to consider other options for that individual.
11. Can someone who is off sick be furloughed?
-No. An employee must be ready and able to work.
12. What if an employee becomes sick whilst on furlough leave?
-An employee who has a contractual entitlement to company sick pay and who becomes sick whilst on furlough leave may wish to be placed onto sick leave, so to receive enhanced sick pay. The guidance is not clear on whether this should be done, especially if the employee has not had their minimum furlough leave of three weeks. We await further clarity on this point.
13. Can someone who is on maternity, paternity or other family friendly leave be furloughed?
-No. An employee must be ready and able to work. At the end of their leave, they may be furloughed if there is no work available for them.
14. Can I furlough an employee in the “extremely vulnerable” or “vulnerable” categories detailed above?
-Yes, and although there is potential for an indirect discrimination claim to be brought in such circumstances, we consider such claims may be capable of being defended on the basis of objective justification.
15. Does the scheme apply to fixed-term workers?
-We believe the scheme will apply to workers on fixed-term contracts, where they are paid via PAYE. It is unclear at present what the position will be at the point the fixed term contract expires.
16. Does the scheme apply to zero-hours workers?
-Yes, providing they are paid through PAYE.
17. Do I need to consult with staff prior to placing them on furlough leave?
-You should consult with staff, insofar as this involves informing them of the proposal and seeking their consent. We believe verbal consultation in this regard would be sufficient. It is open to debate as to whether proposing to furlough 20 or more employees at the same establishment within 90 days gives rises to an obligation to collectively consult in advance. Our preliminary view is that this is that this is unlikely on the basis that there is no proposal to dismiss at that stage – merely offers of paid leave being made to staff as an alternative to other measures such as lay off or redundancy, but in reality no-one knows for certain given the unprecedented measures being introduced. If you proposed to dismiss as redundant 20 or more employees in the event of them objecting to being placed on furlough leave, collective consultation would, however, be required at that juncture.
18. What if an employee refuses to agree to be furloughed?
-If you don’t have enough work for an employee who refuses to be furloughed, you may be able to use some of the other options set out below: • Temporary lay-off • Short-time working • Redundancies • Varying contractual hours • Paid/unpaid leave (including annual leave) • Wage reductions
19. Can I reduce someone’s hours and place them on furlough at the same time?
-No, that will not be possible. Only employees who are doing no work at all for you can be furloughed. So you could not have someone working, for example, three days a week for you and claim a furlough payment for the other two days per week. You can only claim furlough payments for employees who are working zero hours.
20. Does a furloughed employee still pay tax on their earnings?
-Yes, and deductions should therefore continue to be made as normal.
21. Can a furloughed employee continue to carry out some of their duties from home?
-No. A furloughed employee must not carry out any work, even from home. They can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation. In relation to any time training, you must ensure the minimum wage is paid.
22. Can a furloughed employee work elsewhere?
-Yes, providing they had that job prior to 1 March 2020. We don’t believe a furloughed employee can take up new employment elsewhere whilst on furlough leave.
23. For how long do I have to furlough an employee?
-The minimum period is 3 weeks. There is no maximum period, and this will be subject to any further updates from the government in relation to when the scheme ends.
24. Can I bring a furloughed employee back to work and then ‘re-furlough’ them?
-The scheme does not appear to preclude this, provided that each period of furlough leave is a minimum of three weeks. However, the government guidance does not include an express confirmation that the same person can be furloughed more than once.
25. Can an employee request to be furloughed?
-Yes they can, however they cannot insist on this. It is for the employer and employee to agree if the employee will be furloughed.
26. Can a furloughed employee be required to take annual leave?
-We think this is possible but we await clarity on this point.
27. If an employee has been unable to use their annual leave by the end of our holiday year as a result of coronavirus, what should we do?
-In these circumstances, i.e., where it is not reasonably practicable for the employee to take some or all of the holiday they are entitled to due to coronavirus, the government has announced that an employee can carry over four weeks of their annual leave entitlement into the next two leave years. Whether the employer will permit the employee to carry forward any additional annual leave would be a matter for contractual agreement.
28. What if I can’t afford to furlough an employee pending reimbursement from HMRC?
-There are business loans available that may assist with short term cash flow issues. If this is not appropriate for your business, we would suggest in those circumstances that you seek to agree with employees that they will be paid upon reimbursement being provided by HMRC.