The government has announced a package of measures to support public services, people and businesses through this period of disruption caused by COVID-19 including the Coronavirus Job Retention Scheme (the furlough scheme.)
Since then employers have had a number of questions regarding how the Scheme will operate in practice.
The government has now published further details of the Scheme and the employee guide.
It is unclear whether HMRC intends to rely on this guidance only, or whether there will be actual legislation. The key points are:
1. What businesses are eligible to access the Scheme?
The Scheme is open to all UK employers that had a PAYE scheme in place on 19 March 2020.
The guide for employees states: “If you and your employer both agree, your employer might be able to keep you on the payroll if they’re unable to operate or have no work for you to do because of coronavirus (COVID-19).”
2. Who is covered?
To be eligible, the employee must have been on the payroll on 19 March 2020. If they were hired later, they are not eligible. Anybody who was on the payroll on 19 March 2020 and has since been made redundant can be rehired and put on the Scheme.
If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this Scheme.
3. How long can an employee be furloughed for?
The Scheme is currently available for a maximum of 3 months, but this may be extended. Extended now to end June 2020.
The minimum furlough period is 3 weeks.
Claims can be backdated until the 1 March 2020 if applicable.
4. What is paid?
The guidance states:
“You will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage.”
Fees, commission and bonuses are not included.
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
5. How is the payment calculated for employees whose pay varies?
If the employee has been employed 12 months prior to the claim, you can claim for the higher of either:
the same month’s earning from the previous year
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.
If the employee only started in February 2020, use a pro-rata for their earnings so far to claim.
6. How does the Scheme interact with NLW/NMW?
Furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.
7. What about employees who are currently off sick or self-isolating?
Employees on sick leave or self-isolating should get SSP, but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
Self Isolating or on Sick Leave:
This section has been expanded to deal with a number of scenarios previously not covered.
The Guidance now confirms that the Scheme is not intended for short-term absences from work due to sickness, and there is a reminder that there is a 3-week minimum furlough period.
However it goes on to state that short-term illness / self-isolation should not be a consideration in deciding whether to furlough an employee.
Therefore, if employers want to furlough employees for business reasons and they are currently off sick, they can do so, as with other employees.
In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee. In other words, employers are able to reclassify those on sickness absence as being on furlough.
Employers are also entitled to furlough employees who are being shielded or off on long-term sick leave. It is up to employers to decide whether to furlough these employees.
The Guidance also confirms that the employer can claim back from both the Coronavirus Job Retention Scheme and the SSP rebate scheme for the same employee but not for the same period of time. In other words, for any specific time you can either recover the furlough monies, or SSP, but not both for the same period.
If a non-furloughed employee becomes ill, and needs to self-isolate or be shielded, then the employer might qualify for the SSP rebate scheme, enabling a claim up to two weeks of SSP per employee.
If your Employee becomes sick while Furloughed
This is another new Section and confirms that furloughed employees retain their right to Statutory Sick Pay.
This means that furloughed employees who become ill must be paid at least Statutory Sick Pay. But it is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate.
If a furloughed employee who becomes sick is moved onto SSP, employers can no longer claim for the furloughed salary. Employers should take care that if they decide to change employees off furlough to sick leave to consider if that would break the minimum 3 week furlough period and affect their ability to reclaim those furlough monies.
Employers are required to pay SSP themselves, although may qualify for a rebate for up to 2 weeks of SSP (that applies to any with less than 250 employees). Importantly, it confirms that if employers keep the sick furloughed employee on the furloughed rate, they remain eligible to claim for these costs through the furloughed scheme.
Shielding Employees
As we know employees who are unable to work because they are shielding in line with public health guidance (or need to stay home with someone who is shielding) can be furloughed.
The additional words that were present in the second version ‘and otherwise would be made redundant’ have been removed in this version. This has softened the approach to those shielding and aligns this category to the persons that have caring responsibilities.
8. Can the employee do any work including volunteer work or training?
The employee must not be working at all for their current employer but can indeed take a second role elsewhere as long as their contract allows them to do so. The latest advice is encouraging furloughed workers to under work as part of harvesting process needed across the UK. However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.
9. What if the employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay?
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 your 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).
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.
10. What do you need to make a claim?
The guidance confirms employers should discuss with their staff and make any changes to the employment contract by agreement. Employers should refer to the guidance for the list of information required to make a claim.
*Note that HMRC retains the right to retrospectively audit all aspects of an employer’s claim.
Coronavirus Job Retention Scheme – 10 Key Points for Employers
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