Further Coronavirus Job Retention Scheme guidance published: What you need to know

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Further Coronavirus Job Retention Scheme guidance published: What you need to know

Published 27 March 2020

The Government have released further welcome guidance on The Coronavirus Job Retention Scheme. The scheme is designed to support employers severely affected by coronavirus (COVID-19) by paying a proportion of employees' salary for those who would otherwise be made redundant during this crisis. 

In this article, we answer some frequently asked questions.

What are the key elements of the scheme?

  • Employers can claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month. The guidance has now clarified that employers can also claim the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
  • It is expected that the scheme will be operational by the end of April 2020 and it will be backdated to 1 March 2020, to enable organisations to re-employ individuals who have already been laid off and for those workers to recoup lost income.
  • The Government intends for the scheme to run for at least three months from 1 March 2020, but has stated that it will extend it if necessary.

Can all employers apply for reimbursement under the Scheme?

The scheme is open to all UK employers that had created and started a PAYE payroll scheme on or before 28 February 2020. This includes charities, recruitment agencies (agency workers paid through PAYE) and public authorities, although the Government expects that the scheme will not be used by many public sector organisations.

Does the scheme apply to all employees? What about those on zero hours contracts?

The scheme will apply to any furloughed employees who were your PAYE payroll on 28 February 2020, including: full-time employees, part-time employees, employees on agency contracts and employees on flexible or zero-hour contracts.

Significantly, the scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.

How much will be reimbursed and what does it cover?

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 should not be included.

At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. You can also choose to top up an employee’s salary beyond this (ie up to 100% or more than the cap) but are not obliged to under this scheme (however, please see below for the contractual considerations attached to reducing pay).

How do I go about making a claim?

Businesses will need to:

  • Designate affected employees as ‘furloughed workers’;
  • Notify the employees of this change and in most cases make any changes to the employment contract by agreement (see below for further details); and
  • Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal (HMRC have set out further details on the information required in the guidance).

Employers can use the scheme anytime during the period when the scheme is open.

How can we 'furlough' employees?

If there is a lay off clause in the contract of employment the employee can simply be notified of the change: they should be notified that they will be a furloughed worker under the Scheme.

However, many employment contracts will not contain such a term and any unilateral reduction in pay (ie if you do decide not to pay the additional 20%) will therefore be seen as a breach of contract. In such cases, you will have to seek the employee's agreement to the change either individually or collectively via a trade union. This is likely to be an attractive option for employees to accept if the alternative could be redundancy.

Any agreement should be recorded in writing and should contain details of the agreed period of 'furlough'.

It may be necessary to engage collective consultation processes to procure agreement to changes to terms of employment. Collective consultation obligations are usually triggered if an employer intends to vary 20 or more contracts in one establishment within a period of 90 days or less (ie here to reduce employees' pay to 80%) and to dismiss those who don't agree. There is a ‘special circumstances’ exemption which might be available to you and we can assist if this is applicable.

How does the introduction of the concept of 'furlough' impact on proposed redundancies?

The main consideration will be whether you expect the shortage in work to be temporary in nature. Businesses should consider whether it is better to 'furlough' employees now, with the possibility that they will still have to make them redundant later, or move straight to redundancies now. You should also bear in mind that some employees will accrue the two years' continuous service required to claim unfair dismissal and/or statutory redundancy pay by being on 'furlough' for 3 months or longer.

If an employee is currently on sick leave or self isolating on Statutory Sick Pay can they instead be furloughed and receive 80% of their salary?

Employees on sick leave or self-isolating should continue to receive SSP but can be furloughed afterwards.

Employees with a high risk of severe illness from coronavirus because of an underlying health condition, who are shielding in line with public health guidance, can be placed on furlough.

If someone becomes sick or is in self-isolation during the time they are furloughed do I switch them to statutory sick pay?

This is not covered in the current guidance. Our expectation is that once you have taken the decision to furlough an employee they will be entitled to the 80% even if they subsequently become sick. There would only be an issue at the point you lift the furlough and expected them back at work. Clearly at that stage their entitlement would convert to SSP.

Can the employees still do some work whilst furloughed?

When on furlough, an employee cannot undertake work for or on behalf of their employer.

If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of their employment contract.

However, there is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks.

We need some staff to stay on and work. Can I choose which staff stay on and which are furloughed or is there a set process?

In many circumstances, a lack of work will dictate that you will need to furlough a group of employees undertaking the same role. However, if you have to decide which employees to 'furlough' from a pool of employees, you might want to ask for volunteers initially. If it is not possible to agree who will be furloughed, then you will need to carry out some form of selection process. The key is to have a selection process which is fair and non-discriminatory.

What happens with employees on maternity, adoption or parental leave?

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.

If you offer enhanced contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme. However, you should take advice before “furloughing” a woman on maternity leave regarding the implications for their maternity leave at the end of the furlough period.

The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.

What happens if reducing an employee's pay will take their pay below the National Minimum Wage?

The guidance states that 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 NMW.

However, if workers are required to for example, complete online training courses whilst they are furloughed, then they must be paid at least the NMW for the time spent training, even if this is more than the 80% of their wage.

Does an employee who has been furloughed continue to accrue holiday?

This is not covered in the guidance, but it is our view that holiday would continue to accrue.

Can an employee work for someone else when they are furloughed?

The guidance states that if your employee has more than one employer they can be furloughed for each job. For example where you have a part time employee who already works for another employer. Each job is separate, and the cap applies to each employer individually.

It does not actually cover the situation where an employee is furloughed with one employer but continues to work for the other. Whilst the employee must not carry out work for the employer who has furloughed them we believe they would be able to continue to work for another employer.

Should I suspend disciplinary and/or grievance procedures and investigations if an employee is furloughed?

For all non-critical matters, we think you would be justified deferring any disciplinary hearings (or indeed probationary reviews etc) until after the employee returned to work. However, we would recommend expressly notifying the employee of this fact at the time they are placed on furlough.

Ideally you should agree with the employee that any investigation into their grievance should be deferred rather than just imposing a delay.

The alternative may be to conduct meetings by Skype etc.

 

Authors

James Rhodes

James Rhodes

Leeds

+44 (0)113 251 4795

Joanne Bell

Joanne Bell

Manchester

+44 (0) 161 934 3179

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