In light of further details which have now been released following a Treasury Direction and new Government guidance published on 20 April 2020, this page answers some frequently asked questions regarding the new Coronavirus Job Retention Scheme. The various guides can be accessed below:
In this email, we refer to the “guidance” as the guidance published on the Government website from time to time. This guidance has bene updated every few days and we expect that this tinkering will continue.
The Direction contains a definition of a “furloughed employee”. Whilst the Direction refers throughout just to “employees”, it is assumed that the definition is intended to also refer to workers who are paid through PAYE, given that the guidance expressly says that the scheme also covers workers.
For clarity, references to “individuals” throughout this blog should be deemed to include employees and workers.
Under the Direction, an employee is a furloughed employee if:
a) “The employee has been instructed by the employer to cease all work in relation to their employment,
b) The period for which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more, and
c) The instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease.”
Under the Coronavirus Job Retention Scheme, the Government has pledged to cover 80% of furloughed workers’ salaries up to a cap of £2,500 a month, which the employer can claim as a grant.
The reimbursement is 80% of a worker’s wage costs up to a maximum cap of £2,500 per month, plus employer’s National Insurance contributions and the minimum auto-enrolment employer pension contributions. This is calculated on the “regular wage” the individual receives (see question 16).
The Coronavirus Job Retention Scheme entitles employers to claim a grant from HMRC and therefore it does not need to be paid back.
The online claim service for the Coronavirus Job Retention Scheme launched on Monday 20 April 2020. Employers have to submit certain information to HMRC in order to register a furloughed employee.
In order to submit a claim, companies will need:
The portal is now available to access, and opened on Monday 20 April. Therefore, we can expect that grants will start to be made soon. Employers are able to backdate any claim to when the employee went onto furlough/stopped working. Claims can be backdated as far back as to 1 March 2020.
In both cases the employee will not be undertaking any work for the employer for a period of time, but their employment will be continuing. The main difference is that a furloughed worker continues to be paid during this period. Also:
Given these unprecedented times, many businesses may not have enough work for their staff and would therefore struggle financially to continue paying them their full wages.
Previously, the Coronavirus Job Retention Scheme was stated as providing a means for employers to avoid making staff redundant. There was therefore a discussion as to whether employers would need to show that they would have otherwise made the relevant individuals redundant.
However, the scope of the scheme now appears to have been extended, with the Direction outlining that the purpose of the scheme is to:
“provide for payments to be made to employers…of furloughed employees arising from the health, social and economic emergency in the United Kingdom resulting from Coronavirus and Coronavirus disease”
Previous guidance stated that an individual must have been on the employer’s PAYE payroll by 28 February 2020. However, following the new Direction and guidance, employers can claim for furloughed employees who are on the PAYE payroll on or before 19 March.
However, it appears from the Direction to be on a PAYE payroll it is not sufficient for the individual to simply be employed (or engaged in the case of a worker) on or before 19 March, and instead the individual must have received a payment (which has been notified to HMRC on an RTI submission) on or before 19 March 2020. This is potentially significant for those with a monthly payroll which is paid at the end of a month, which is common. The stated purpose of the change of date from 28 February 2020 to 19 March 2020 is to bring those recently recruited into the scope of the scheme. However those recruited in early March 2020 (and even late February 2020) may not receive their first payment until the end of March 2020, and they will not therefore have been paid on or before 19 March 2020, and therefore will be outside of the scope of the scheme.
The guidance states that employees can be on any type of contract, including full-time, part-time, agency, flexible or zero-hour contracts. Foreign nationals are eligible to be furloughed.
The scheme is also stated to apply to the following, if they are paid via PAYE: office holders (such as company directors), salaried members of Limited Liability Partnerships (LLPs), agency workers (including those employed under umbrella companies), and limb (b) workers.
No, employers need to designate the staff as furloughed.
Employers are not under an obligation to place employees on furlough. It might be that all or some of the roles can still be performed, in which case not all employees will be furloughed. In these cases, the employer should adopt fair and non-discriminatory selection criteria for determining which employees, if any, will go onto furlough, which may involve initially asking for volunteers. This will avoid or any complaints such as potential discrimination claims arising from the process of selection.
Employees will not be able to do any work for their employer (or any associated employer) during this time. It is therefore important for employers to appreciate that they cannot call on furloughed employees if they need them to do some work.
Furloughed employees can however undertake volunteering and training, provided they are not:
Under schedule 7 of the newly enacted Coronavirus Act 2020, employees now have an entitlement to emergency volunteering leave. This is limited only to supporting the NHS and health services “as an emergency volunteer in health or social care”.
An employer would not be able to furlough employees and request that they then volunteer to complete work for them – i.e. you can’t volunteer for your same employer.
Employees on furlough can take a temporary job with a new employer, provided the contract of employment permits this (or the employer agrees by way of a variation).
Any furlough leave must be a minimum of three weeks but could be as long as the scheme continues. The scheme, when launched, was for an initial period of 3 months until 31 May 2020. However its now been extended, and will last until 30 June 2020.
The is currently a conflict on this point between the guidance which has been issued, and the Direction.
The Direction states that where SSP is payable or liable to be payable in respect of an employee (whether or not a claim to SSP is made) at the time when the instruction to cease work is given, the 21-day period (being the minimum period of furlough) does not begin until the original claim or entitlement to SSP has ended. The above therefore appears to mean that where an employee is off sick, and entitled to SSP (whether or not SSP is claimed), the employer cannot start the furlough period until they have returned from sick leave (or at least notionally because they won’t be returning to work probably).
However, the guidance conflicts with the above and says that employees who are sick can be furloughed. The guidance says:
“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”
Where employers have put individuals who were on sick leave onto furlough, relying on the guidance in doing so, we would suggest that they include such individuals on their claim to the Government, and if challenged refer to the guidance which says that this is permitted.
The Government introduced new regulations on 19 April to provide that employees who fall within the vulnerable category and therefore have been advised to shield will also be deemed to be incapable of work, and therefore entitled to sick pay.
The impact of this change on the ability to furlough individuals who are ‘shielding is unclear’. If those who are shielding are entitled to SSP, then under the strict wording of the Direction they would not be entitled to be furlough until their period of shielding (and hence their entitlement to SSP) comes to an end – see answer to question 13 above. However if this is the case then it would, again, conflict with the guidance which has been issued which states:
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.
Again where employers have put individuals who were shielding onto furlough, relying on the guidance in doing so, employers might choose to include such individuals on their claim to the Government, and if challenged refer to the guidance which says that this is permitted.
An employee can be put on furlough by one employer and continue to work for another, provided this is permitted by their contract of employment.
An employee can also be put on furlough leave by more than one employer. In these circumstances, they will receive separate payments from each employer and the 80% of their normal wage up to the cap of £2,500 a month applies to each job.
As stated previously, furloughed individuals receive either 80% of their regular wage or £2,500 per month, whichever is lower.
Therefore, the key aspect to consider is the meaning of “regular wages”, and the Direction defines this. Under the guidance previously issued, it would appear that the intention was that variable commission can be included as falling within “regular wages” if it is a compulsory contractual entitlement. However, discretionary bonuses and discretionary commission payments would not be included.
Under the Direction there is also a requirement that the payment is ‘not conditional on any matter’. This phrase is extremely vague, and it is unclear what it means. Virtually all commission payments will be conditional upon something, e.g. the commission paid to a car sales person is conditional upon them selling a car. However arguably any payment to an employee is conditional upon something, even a payment of normal wages is conditional upon the employee being ready and available for work.
This is therefore another area where, unfortunately, the Direction and the guidance conflict. Employers might choose to include a claim for contractual commission in their claim under the scheme, and if challenged, refer to the guidance in support of their argument that commission is recoverable. This aspect will hopefully be confirmed before the May furlough payments become due.
The guidance originally issued encouraged employers to discuss the situation with staff and make any changes to the employment contract by agreement, but only referred to the need for the employer to “confirm in writing to their employee confirming that they have been furloughed.”
Many employers therefore relied upon the early guidance, and where they were only paying the 80% which could be claimed under the scheme, they were obtaining consent from employees, as this would constitute a change of contractual terms. However where the employer was ‘topping up’ pay to 100% many employers did not obtain express agreement because it did not appear to be necessary. Provided the employer was continuing to pay normal salary they were not changing any contractual terms. They were then simply ‘confirming’ to individuals that they had been furloughed.
Following the publication of the Direction, the above appeared to be the incorrect approach, and the Direction suggested that consent should be obtained in all cases. The Direction states that for an individual to be on furlough:
“the employer and employee have agreed in writing (which may be in an electronic form such as an email) that the employee will cease all work in relation to their employment.”
The latest guidance (issued on 20 April) now says something different again:
“To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS.”
Given the conflict between the guidance and the Direction, we were suggesting to employers that they may wish to take a cautious approach and if they didn’t obtain the express agreement of their staff in writing, they may now choose to send a follow up e-mail to now obtain that agreement (by way of confirmation).
However some clarification has now been provided by HMRC, in the form of a letter responding to a question which had been asked about consent. HMRC agreed that this response could be made public, and in this response HMRC has stated that employers should follow the Guidance (and that they will treat applications for reimbursement under the Furlough Scheme in accordance with the Guidance).
A record of your furlough communication must be kept for five years.
For staff who work variable hours, employers can claim under the scheme either for the pay paid in the corresponding month last year or the average earnings for the previous 12 months. If they haven’t worked all year, then it is calculated on the basis of their average earning to date.
An employer is able to rotate staff on furlough leave provided each period of leave is 3 weeks. An employee is also able to have more than one period of furlough leave, provided again each period of furlough leave lasts for 3 weeks.
Individuals are able to take holiday whilst on furlough.
If individuals do take holiday then this should be paid at the normal rate of pay, which can include overtime, bonuses and commission payments provided these are sufficiently regular so as to count as normal remuneration. Employer will therefore need to top-up the employees’ wages during the time they take as holiday.
We are still awaiting further clarification on whether employers can require employees to take holiday during the period of furlough leave, however the ACAS guide suggests that this is possible, subject to giving proper notice (of twice the period of leave which the individual is being asked to take, so if an employer wants an individual to take 1 week’s leave then 2 weeks’ notice is necessary)
Under the Coronavirus Job Retention Scheme, employees on furlough leave may technically not be working the minimum work requirements under the EMI legislation. This could therefore be a “disqualifying event” resulting in the loss of the tax advantages of EMI options.
We understand that HMRC have been made aware of this and we are hoping they will publish a concession similar to that granted to armed forces reservists who are called up. In the meantime, our advice is that it is safer not to furlough such employees if you want to ensure their options remain unchanged.
Directors can also be furloughed. This also applies to salaried individuals who are directors of their own personal service company (PSC).
When furloughed, directors cannot work for their employer. However they can do tasks to fulfil their statutory duties as a director, but this appears to be a very limited exemption and covers tasks such as complying with filing requirements at Companies House. This exemption for statutory director duties would not allow the director to do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.
We will continue to monitor the situation. If you have any questions in relation to the scheme, please contact a member of the Employment team.
If you would like further guidance in relation to the Coronavirus Job Retention Scheme, please do contact a member of the Employment team.
Further guidance from the government on The Coronavirus Job Retention Scheme:
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