27 March 2020
This information sheet was drafted on 27 March 2020 following the publishing of some further guidelines by the government regarding the newly introduced “Furlough Leave” under the terms of the Coronavirus Job Retention Scheme (the “Scheme”).
The aim of the Scheme remains to keep jobs, keep businesses going, prevent a crash in the economy and to avoid mass unemployment. As further details of the Scheme have been released it is now clearer who it applies to and how it will work. However, further detail and clarification by the government and HMRC is likely to be published in due course. We will update our guidance in accordance with further details when released.
Who Can Claim:
The scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020 and have a UK bank account.
It includes all businesses, charities, agency workers (paid through PAYE and who are not working) and in a more limited way to public authorities affected by COVID-19.
Administrators can also claim where a company has already gone into administration.
How long will the Scheme run for?
The Scheme runs for a three-month period which commenced on 1 March and will end on 31 May 2020 unless the Scheme is extended by the Government.
Who Can You Claim For?
Employees who were on payroll on 28 February 2020 on any type of contract and who are placed on Furlough Leave. The Scheme does not apply to any new employees employed after 28 February 2020. The Scheme applies to:
- Full-time employees;
- Part-time employees;
- Agency workers in your business paid through PAYE; and
- Flexible and zero hours employees.
Employees who were made redundant after 1 March 2020 can be reinstated and placed on Furlough Leave.
Employees who are shielding in line with public health guidance can be placed on Furlough Leave but employees on sick leave or self-isolating should get Statutory Sick Pay. Employees may be placed on Furlough Leave when they return to work.
You cannot claim Furlough Leave for anybody hired since 28 February 2020.
Employees on unpaid leave cannot be placed on Furlough Leave unless their unpaid leave started after 1 March 2020. If this is the case, you can claim under the Scheme for their wages.
Minimum Period for Furlough Leave
A period of Furlough Leave must be for at least three weeks in order to qualify for reimbursement under the Scheme.
Any rotation of employees on Furlough Leave must therefore be on a three-weekly basis.
What Can You Claim?
The Scheme will pay 80% of wages whilst an employee is on Furlough Leave up to a maximum of £2,500.
Fees, commission and bonuses cannot be included in the calculation of wages.
The initial guidance stated that wages would be based on pay received in February 2020. The guidelines now say that if an employee is not on a fixed wage, you can claim the higher of:
- the same month’s earnings for the previous year; or
- the average monthly earnings for the tax year 2019-2020.
For employees of less than a year in employment it will be an average of their monthly earnings since they started work and for employees who started in February 2020, a pro-rata of their earnings.
The amount paid to the employee will be subject to income tax and national insurance contributions as well as pension contributions unless the employee has opted out or decides to opt out for the period on which they are on Furlough Leave.
In addition to wages, you can claim back the employer national insurance contribution and the minimum auto-enrolment pension contribution on the sum claimed.
Do you have to pay full wages?
If you do not pay the normal full wages, you will need to get each employee to consent to a reduction in pay for the period whilst on Furlough Leave as this will be a change to their contractual terms. The only exception is if their employment contract contains a provision which allows you to unilaterally reduce wages and place them on leave.
If you elect to top up the wages of the employee, which is not compulsory, the employer national insurance and pension contributions in respect of the top up will have to be met by you.
If you do not pay full wages and more than twenty employees are involved it may be necessary to engage in a collective consultation processes to secure employee agreement to changes to the terms of employment.
How do you claim?
The grant will be claimed from HMRC through a portal that will be set up for this purpose by the end of April 2020. The latest guidance gives an indication of the list of information which you will need which includes:
- your PAYE reference number
- the number of employees being furloughed
- the claim period (start and end date)
- amount claimed (note the minimum length of furloughing of 3 weeks)
- your bank account number and sort code
- your contact name
- your phone number
You also need to calculate the amount you are claiming. We recommend doing this now so that an application can be made as soon as the portal goes live.
HMRC will publish further guidance on what is required before the portal goes live.
What work can an employee do whilst on Furlough Leave?
The employee must not carry out any paid work during their Furlough Leave. You cannot use the Scheme if your employees are still working for reduced pay or reduced hours.
Employees can undertake training or voluntary work during a period of Furlough Leave. If an employee does carry out online training it appears that the national minimum wage must be paid for the time they spend on the training.
Do I have to still follow a fair procedure and employment law?
Yes. All the usual rules of employment law still apply including anti-discrimination and fairness when selecting employees to go on Furlough Leave.
You should maintain a clear record of those on Furlough Leave and the basis of the decision to place them on furlough. This is particularly important if being placed on Furlough Leave is compulsory.
It does not appear that furloughing vulnerable employees on the grounds of health or the government guidelines if they are not able to work from home for whatever reason will be deemed as discriminatory.
What is important is that all Furlough Leave is clearly notified to the employee in writing and that you maintain copies of the furlough notices and criteria for selection for furlough. This information will be required as evidence both for making a claim for a grant under the Scheme and in the event of any employee challenging their selection at a later date.
Maternity Leave and other leaves
Employees on maternity/adoption/shared parental leave can continue to draw statutory maternity pay (or similar) payments. The guidance does not appear to prohibit women on maternity leave agreeing to return to work early and then being placed on Furlough Leave or electing to change to shared parental leave and then being placed on Furlough Leave. It is likely however, that 8 weeks’ notice would be required in respect of an early return from maternity leave in the usual way.
It appears that if you pay enhanced contractual pay for maternity leave this can be claimed as a furloughed wage cost.
For full details of the government guidelines on claiming though the scheme please go to the GOV.UK website. We should all watch out for government updates and announcements as things may change on a daily basis.
We will keep you updated as quickly as possible with developments.
For further information, please contact our employment team on 01256 460830.
This article is current at the date of publication set out above and is for reference purposes only. It does not constitute legal advice and should not be relied on as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.
Please call us or email and we’ll get back to you as soon as possible.
- 01256 460830
- [email protected]
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