On 9 April 2020 the government issued a further update to the Furlough Scheme which answers some of the outstanding queries, but unfortunately not all.
Some outstanding Furlough Scheme questions answered
This blog looks at further furlough scheme questions which have been answered. It doesn’t deal with the points which were already clear, and which were included in previous guidance and updates, and so this blog should be read in conjunction with our previous blogs:
- Coronavirus – Furlough Scheme update – 05.04.2020
- COVID-19 : Annual leave, bank holidays and furlough
- Coronavirus : Job Retention Scheme – Can directors be furloughed?
- Coronavirus Job Retention Scheme – FAQs for employers
- The Coronavirus Job Retention Scheme – FAQs for employees
- The Coronavirus Job Retention Scheme and the furloughed worker
Sick leave and furlough scheme
The previous guidance stated that you couldn’t furlough an employee who was previously on sick leave, and that such employees should be paid SSP (and potentially contractual sick pay) whilst off sick. However, they could be furloughed when they returned from sick leave.
The amended guidance now says that employees who are on sick leave can be furloughed. Once they are furloughed then their salaries can be reclaimed under the furlough scheme, and they will no longer be entitled to sick pay. The guidance makes clear that staff should not be furloughed because they are on short term sick leave, and that the furlough scheme is not intended to simply be a replacement to the SSP scheme. However, if there are business reasons to furlough the employee, merely because they are, at the time, on sick leave does not prevent them from being furloughed. The amended guidance says:
“If your employee is on sick leave or self-isolating as a result of Coronavirus, they’ll be able to get statutory sick pay, subject to other eligibility conditions applying. The Coronavirus Job Retention Scheme is not intended for short-term absences from work due to sickness, and there is a 3-week minimum furlough period.
Short term illness/ self-isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to 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”.
The updated guidance clarifies that staff who are social distancing, because they are in a vulnerable group, can be furloughed, which we knew already. However, consistent with the above, the updated guidance also confirms that those on long term sick leave can be furloughed. This is confirmed in the updated guidance where it says:
“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. You 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. When an employee is on furlough, you can only reclaim expenditure through the Coronavirus Job Retention Scheme, and not the SSP rebate scheme. If a non-furloughed employee becomes ill, needs to self-isolate or be shielded, then you might qualify for the SSP rebate scheme, enabling you to claim up to two weeks of SSP per employee”.
The updated guidance also confirms what employers should do if an employee becomes ill whilst on furlough. The guide makes clear that the employer has the choice whether to move the employee onto sick leave, and if they are moved to sick leave then they should be paid under the SSP scheme and not under the furlough scheme. This is therefore only likely to be an issue where the employer pays contractually enhanced sick pay, as there would seem to be little reason to move an employee onto sick leave where the employee will only be paid SSP. In this regard the updated guidance says:
“Furloughed employees retain their statutory rights, including their right to statutory sick pay. This means that furloughed employees who become ill must be paid at least statutory sick pay. 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 are required to pay SSP themselves, although may qualify for a rebate for up to 2 weeks of SSP. If employers keep the sick furloughed employee on the furloughed rate, they remain eligible to claim for these costs through the furloughed scheme”.
One question the guide doesn’t answer is whether an employee can insist on switching from furlough leave to sick leave, which they may wish to do if under furlough leave they are only being paid 80% of their salary, whereas if they were paid sick pay they would be paid 100% under a contractual sick pay scheme.
The guide also suggests that transferring an employee to sick leave will bring their furlough period to an end. Employers should therefore be careful about doing this, as if an employee has been on furlough leave for less than 3 weeks this could affect the ability of the employer to claim for the period of furlough before the employee transferred to sick leave, as the guide makes clear that the minimum period of furlough is 3 weeks.
TUPE and furlough scheme
The previous guidance stated that an employee had to be on the employer’s payroll as of 28 February 2020, for the employer to be able to claim under the scheme. This meant, potentially, where there was a TUPE transfer after 28 February 2020 the new employer couldn’t claim under the scheme.
An exception has now been made for TUPE transfers, and its been made clear that the new employer will be able to claim under the furlough scheme in respect of the transferring employees. The updated guidance says:
“Employee transfers under TUPE and on a change in ownership – A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28th February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership”.
Not working for your employer & group companies
Whilst in furlough, an employee cannot work for their employer. Not unsurprisingly the government has closed the potential loop hole of the employee working for a group, or associated, company. In connection with voluntary work, the updated guidance says:
“If your employee does volunteer work – A furloughed employee can take part in volunteer work, if it does not provide services to or generate revenue for, or on behalf of your organisation or a linked or associated organisation. Your organisation can agree to find furloughed employees new work or volunteering opportunities whilst on furlough if this is in line with public health guidance”.
What you pay the employee?
The updated guidance makes clear that subject to deductions for tax and employee’s national insurance, all of the grant should be paid to the employee. In particular, employers cannot recover the cost of benefits which continue to be provided. The guidance makes this clear by saying:
“All the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.
Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme”.
The guide also makes clear that the employer can’t deduct any administration or processing costs, by saying:
“Employers cannot enter into any transaction with the worker which reduces the wages below this amount. This includes any administration charge, fees or other costs in connection with the employment”.
What you can recover?
The updated guidance has clarified two points with regard to what you can reclaim.
If you decide to top up the salary to 100%, then you cannot recover any additional tax which is payable, or employer pension contributions, on the amount of the top up. This is made clear by the guide which says:
“You cannot claim for:
- additional National Insurance or pension contributions you make because you chose to top up your employee’s salary
- any pension contributions you make that are above the mandatory employer contribution”
What isn’t answered about the furlough scheme?
Unfortunately, the guide does not clarify the interaction between holiday and furlough leave. This is particularly disappointing, as this is probably the main issue that employers wanted guidance on. For a discussion on holiday and furlough leave see our blog COVID-19 : Annual leave, bank holidays and furlough.
If you would like to discuss any issues covered in this update please contact a member of the Employment team.
Our “Coronavirus – Legal advice and guidance” page is updated as and when new/amended guidance comes through from the Government and other regulatory bodies.