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June 8, 2020
COVID-19: Job Retention Scheme FAQs
On Friday 20 March 2020, Chancellor Rishi Sunak set out a package of temporary measures to support UK businesses through this period of disruption caused by the COVID-19 / Coronavirus outbreak. One of those packages announced was the Job Retention Scheme, which is a scheme to support employees during the pandemic.
This document sets out some guidance covering that scheme in a Frequently Asked Questions (FAQs) format. On 15 April 2020, the Treasury issued a Direction to HMRC under powers conferred by the Coronavirus Act 2020, containing authority and instructions for making payments under the Coronavirus Job Retention Scheme. Although amendments are possible, it is likely to be the definitive guidance on how the Job Retention Scheme works.
Below is based on the latest information we have about the scheme, we will continue to update this blog post as necessary.
Q: What is the COVID19 Job Retention Scheme?
A: The current scheme (which will be available until the end of June 2020) allows all UK employers to access financial support to continue paying part of their workers’ wages for those that would have otherwise been laid off during the COVID-19 outbreak.
On 1st July the current COVID-19 Job Retention Scheme will be replaced by a New Job Retention Scheme that will offer more flexibility to employers. Furloughed workers will be able to return on a part-time or reduced-hours basis while employers will still be able to claim financial support to continue to pay part of the workers wages for the days they are not in work.
Q: Which organisations does it apply to?
A: The current scheme applies to all UK business, so limited companies, sole traders, LLP’s, partnerships and charities recruitment agencies (agency workers paid through PAYE) who had a PAYE payroll scheme registered on HMRC’s real time information system for PAYE on the 19th March 2020 (defined as “a qualifying PAYE scheme”).
The above remains the case with the new scheme, however claims will be restricted to employees who have already been furloughed on the scheme which is being replaced. As a consequence, any organisation wanting to make use of the new scheme will need to have furloughed their workers by 10th June, to allow them to complete the minimum 21 calendar days required by the current scheme before it comes to an end on 30th June.
Q: What if I have more than one qualifying PAYE scheme? A: the employer must make a separate claim in relation to each scheme and the amount of any payment will be calculated by HMRC separately in relation to each scheme.
Q: Which employees does this apply to?
A: This applies to all employees who were employed on or before 19th March 2020 which were notified to HMRC on an RTI submission on or before 19th March 2020 and can be on any type of employment contract including; full-time, part-time, agency contracts and flexible or zero hour contracts.
Q: What is a Furloughed Worker?
A: It is not a term that is written into UK law and has been created by the Government to describe those workers who are part of the COVID-19 Job Retention Scheme. Under the current scheme, they are workers who are paid via PAYE, but are temporarily instructed by their employer to cease all work in relation to their employment by reason of circumstances arising as a result of coronavirus or coronavirus disease. An employee has been “instructed by the employer to cease all work in relation to their employment” only if 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 new scheme which will come in to effect on 1st July, will allow more flexibility and employers will be able to bring back to work workers who have been previously furloughed for any amount of time and any shift pattern, while still being able to claim CJRS grant for the hours they are not in work. Employers will be able to agree any working arrangements with previously furloughed employees. To be eligible for the grant, employers must agree with their employees any new flexible furlough arrangement and confirm the agreement in writing.
Q: When does the grant start?
The grant for the new scheme will start immediately on 1st July.
Q: How do I claim the money?
A: You will need to make any payments yourself and will be reimbursed. You will only be able to submit one claim every 21 calendar days, claims can be backdated to 1st March 2020. The online service you’ll use to claim along with details of what you’ll need to make a claims is now available here. For help with this, you can follow the HMRC’s step-by-step employer guidance document.
Q: What if I cannot afford to pay any salary to these workers whilst waiting for the grant?
A: Visit here for more details of support available to businesses during this time.
Q: How much can I claim?
A: On the current scheme you can claim a grant from HMRC to cover the wages of a furloughed employee equal to the lower of 80% of their regular salary as at 28th February 2020, or £2,500 per month, plus the associated Employer National Insurance Contributions (NICs) and minimum Automatic Enrolment employer contributions. Included within the grant are wages, deferred wages (so long as they are not deferred to be paid on condition of the Job Retention Scheme paying out), past overtime, fees and compulsory commission. Not included within the grant are anything which is not “regular salary or wages” so discretionary bonuses/commission, performance related bonuses, any conditional payments (e.g. where a threshold must be met or conditional on the Job Retention Scheme paying out), tips and non financial benefits such as benefits in kind (i.e. the value of health insurance or a car). The new scheme will periodically reduce the amount an employer can claim from the grant with the intention of ending the scheme completely in 31st October. In July employers will continue to be able to claim for 80% of the workers regular salary and the associated Employer National Insurance Contributions and minimum Automatic Enrolment employer contributions, however from 1st August the government will still cover the cost of wages, but the employer will be asked to pay Employer National Insurance and pension contributions. In September the government will drop its contribution to 70% of wages, with the employers expected to contribute the other 10% (if still paying staff 80% of their wages rather than topping up to 100%), on top of the national insurance and pension contributions. In October, this will change again, with the government’s contribution dropping to 60% and employers contributing the remaining 20%.
Q: How long do employees need to be furloughed?
A: The current scheme commenced on 1st March originally for 3 months but was then extended to the end of June and the minimum amount of time an employee can be furloughed is 21 calendar days for each occurrence the individual was furloughed. The current scheme will close on 30th June and from this point onward, employers will only be able to furlough employees that they have furloughed for a full 21 calendar days prior to 30th June. This means that the finial date by which an employer can furlough an employee for the first time will be 10th June and employers will only have until 31st July to make any claims in respect of the period to 30th June. The information that is currently available does not specify how long the period of flexible furlough is required to be or if it will be a requirement at all, however more detailed guidance is expected to be published on 12th June. It is important that when selecting employees your selections are based on furthering the operational needs of the business only. We would encourage you to seek advice from us around your selection method before it is deployed.
Q: Can an employee be part working and part furloughed?
A: Under the new scheme commencing on 1st July, the answer is yes, as long as this has been discussed, agreed with the worker and confirmed in writing and if that worker was furloughed for at least 21 calendar days under the original furlough scheme.
The employer would be expected to pay their normal contractual pay for the hours they are returned to work and they would claim under the CJRS grant 80% of the workers normal pay for the hours which they are furloughed (it would still be at the employers discretion whether or not to top this up to 100%)
Q: What do Businesses need to do Immediately?
A: If you are considering using the new scheme or would like to have the option should you need it, then you should ensure that staff have been furloughed under the current scheme before 10th June.
Contact your furloughed staff and discuss the potential return to work and the hours you are proposing. Also, discuss if they have any commitments which may affect their availability i.e. childcare responsibilities or having to care for a vulnerable adult, issues regarding public transport etc. Confirm any agreed hours in writing (which may be in an electronic form such as an email) retaining all written agreements on your files for a minimum period of 5 years. This process should be subject to “meaningful consultation” meaning you should talk to your workers and gain their verbal and written agreement. In the context that their other options may be lay off, short-time working without additional pay, or even redundancy, it is highly probable that most workers will agree. The key areas to cover in seeking your workers’ agreement are:
What change you are proposing
Why you are proposing to make that change
When that change will take effect
Who is likely to be affected by that change and for how long that change will be in place
If you don’t engage your workers, then there is the theoretical risk of breach of contract or constructive dismissal claims. If you have a recognised trade union or employee consultation group, do check the terms of any collective agreements that are in place and contact Moorepay for advice. Trade unions were involved in creating the scheme and therefore are likely to be broadly supportive. Moorepay have the relevant letters and advice to support you with either the notification or agreement process. If you are a HR Services customer of ours, please call the usual number for advice or review the HR Hub for relevant template letters. If you are not a HR Services customer of ours, please call us on 0345 184 4615 selecting option 1.
Q: What should I do if I am unsure whether I have the relevant clause to just notify employees of the changes?
A: If you are an HR Services Customer you can contact the usual number for advice. You must ask the employees to accept the changes proposed in writing and then record the relevant recorded documentation on your Company files for a minimum of five years.
Q: What do I do if someone doesn’t agree to being Furloughed?
A: If they do not agree to being Furloughed your options (with the relevant contractual right) are lay off or short time working (which may attract statutory guarantee pay not covered by the COVID-19 Job Retention Scheme), or redundancy which (if the employee has more than two years’ service) may attract a redundancy payment (also not covered by the COVID-19 Job Retention Scheme). Please take advice on this question before taking any action.
Q: Does it apply to zero hours staff?
A: Yes it does. Obviously, you are not obliged to offer any work to people working on a zero hours contract however you must note that this scheme has been brought in to protect workers paid through PAYE. Please see the answer below on what to pay a furloughed worker for more details on Zero Hours.
Q: Does the COVID-19 Job Retention Scheme apply to “Workers”?
A: There are different types of workers and we have listed those and our view against each here:
Agency workers engaged under the Swedish Derogation who are not now working and would otherwise be laid off due to the coronavirus emergency are within the scope of the COVID-19 Job Retention Scheme. Workers whose hours have merely been reduced will not qualify.
PAYE workers engaged via staffing companies and paid under the PAYE regime. The suggestion is that anyone paid under PAYE will be covered. The proposals do, however, raise the question of how a staffing company would ensure that furloughed agency workers do not do paid work elsewhere during the furlough period. The COVID-19 Job Retention Scheme is only available for agency workers who are not working elsewhere.
Umbrella workers paid under the PAYE regime are within the scope of the COVID-19 Job Retention Scheme on the basis that they are “employment businesses” (which appears to draw them into the Conduct of Employment Agencies and Employment Businesses Regulations regime). Note that the umbrellas will not be able to deduct any administration fee etc. from the furlough payment.
PSC contractors inside IR35 probably are within the scope of the COVID-19 Job Retention Scheme, subject to a director being able to furlough themselves and being prepared to close their business. We recommend you check with HRMC.
PSC contractors outside IR35 are possibly within the scope of the COVID-19 Job Retention Scheme in respect of any employed earnings declared, but this may be a negligible amount (assuming dividend income will not be included in the calculations). We recommend you check with HMRC.
Note that individuals need to have been on payroll on or before 19th March 2020 which were notified to HMRC on an RTI submission on or before 19th March 2020.
Q: Does the COVID-19 Job Retention Scheme apply to “Self Employed Sub-Contractors”?
A: Company Directors, if salaried, can be furloughed. They can still perform their statutory duties, but not other work for the company. In practice this will need completed via a formally adopted resolution of the Board of Directors, a formal note in the Company records and written notification to the Director(s) in question with all written records retained on file for a minimum of 5 years.
Q: What if an employee was sick on the day I Furloughed them?
A: Furlough does not begin until the current period of sickness has ended.
Q: What if a Furloughed Worker becomes unwell after they have been Furloughed?
A: The advice at this stage is the normal rules in relation to incapacity for work will apply for employees and workers. That said, employees do not qualify for SSP if they are furloughed as part of the coronavirus job retention scheme. Isolation or fit notes are now able to be obtained from NHS 111 online. If an employee or worker who has not been furloughed provides you with an isolation note, then they should move onto SSP, which is payable from day 1. Based on the known advice and payments now available under the Job Retention Scheme, practically speaking it is unlikely a Furloughed Worker will advise you of their requirement to self-isolate or even if they become sick.
Q: Do Furloughed Workers still accrue holidays?
A: Yes, as they are still employed their contractual rights including holidays continue as normal.
Q: Can an employee carry over holidays that were unused whilst they were furloughed?
A: The government has introduced a temporary new law to deal with the disruption of COVID 19 in relation to holiday accrual. Employees and workers continue to accrue leave as per their contract and can carry over up to 4 weeks’ paid holiday over a 2-year period, if they cannot take holiday due to coronavirus.
Q: Can I allow a Furloughed Worker to take holidays during the time they are Furloughed?
A: If they have accrued the holidays in question you can allow them to take it, subject to payment details below. We recommend you do not approve the un-accrued part of the holiday request. Employers do have flexibility to restrict when leave can be taken if there is a business need. This applies for both the furlough period and the recovery period. It is possible to agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.
Q: Can an employer require a Furloughed Worker to take holidays?
A: Subject to Company policy and based on the current employers guidance (which is currently silent on this point) yes, an employer can do this by giving the employee notice of the day or days on which leave is required to be taken and must be given twice as many days in advance of the earliest day specified in the notice as the number of days to which the notice relates. For example, if the employer requires the worker to take one week’s annual leave, it must give the worker at least two weeks’ advance notice. It is important to say it is unclear from the guidance whether employers can require workers to take annual leave during periods of furlough. When that is known the answer to this question may or may not change.
Q: Can an employer cancel a Furloughed Workers’ pre-booked holidays?
A: Subject to a Company policy yes, an employer can do this by giving the employee notice of at least the same length as the period of leave to be cancelled. For example, if the employee has booked a period of four days’ annual leave, the employer must give at least four days’ notice of the cancellation.
Q: What about Bank Holidays?
A: If an employee/worker usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay to 100% normal rate of pay, or give the employee a day of holiday in lieu (paid at 100% normal rate of pay).
Q: What should holiday for Furloughed Workers be paid at?
A: The normal rules in relation to holidays, holiday accrual and holiday pay (note above a temporary update to carry over) will apply for employees and workers, meaning you should top up their pay to 100% their normal holiday pay and reclaim 80% under the government grant for those workers who have been Furloughed. For calculating the normal rate of pay where the pay varies, the employers’ guidance is aligned to the Working Time Regulations which requires it to be calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations.
Q: Can an employee do any work while Furloughed?
A: On the current scheme, no, an employee can not undertake any work on or behalf of the organisation either providing services or generating revenue. The employer and employee must agree 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 and those written agreements are to be retained on your Company files for 5 years. An employee can however take part in volunteer work or training again as long as they are not providing services or generating revenue. An employee training while furloughed must be paid at least the NMW/NLW whilst training even if this is great than the 80% of their wage that will be subsidised. The minimum amount of time an employee can be furloughed is 21 calendar days. An employer can agree to find furloughed workers new work or volunteering opportunities so long as this is in line with the Public Health Guidance.
However, when the new scheme comes in to effect on 1st July, they will be able to work some hours / days and furloughed to the remainder.
Q: Can I bring back furloughed workers if I have work for them?
A: Currently you can only bring furloughed workers back to work after the minimum 21 calendar day furlough period as there is no scope for employees/workers being furloughed part time. The return to work confirmed in writing and records to be retained on your files for a minimum period of 5 years. Returning employees/workers to anything other than the normal contractual hours that were in place as at 28th February 2020 (recommended in exceptional circumstances and having taken advice) will need a written agreement, or reliance on a Short Time Working clause within the signed employment/engagement contract and be paid at those reduced hours; all working hours are not recoverable from the Job Retention Scheme. In practical terms this means after a minimum 21 calendar day furlough period, a Company can rotate a colleague (or group of colleagues) off furlough and provide them with work and pay ideally for a minimum of 1 week (our recommendation from an employee engagement/operational point of view, but note 1 week is not currently a legal requirement), before placing them back on 21 calendar days of furlough again via agreement (please see above).
The new scheme commencing 1st July will allow a more flexible approach and furloughed staff can be brought back part-time. Individual firms will decide the hours and shift patterns their employee will work on their return and will be responsible for paying their wages at their normal contractual rate while they work.
Q: What about employees on unpaid leave?
A: If an employee was enjoying an unpaid sabbatical or other period of unpaid leave on 28 February 2020 Furlough does not begin for that person until expiry of the period of leave agreed or contemplated at its commencement or, where the duration of the leave was uncertain on the 28th February 2020 because its duration is determinable by reference to a particular circumstance, completion of a particular purpose or occurrence of a specified event, the ending of the circumstance, completion of the purpose or occurrence of the event. No claim may be made in respect of an unpaid sabbatical or other period of unpaid leave of an employee beginning before or after 19 March 2020 (whether agreed or otherwise arranged conditionally or unconditionally on, before or after that day).
Q: What if an employee is on Statutory Sick Pay (SSP) or Shielding?
A: Employees on sick leave or self-isolating should get SSP as per legislation, anything relating to Coronavirus COVID-19 is payable from Day 1, however after the period of sickness employees can be then furloughed. Employees who are shielding in line with guidance can be furloughed.
Q: What if an employee works for another employer as well?
A: If your employee has more than one employer they can be furloughed for each job. Each job is treated as separate and the cap applies to each individual employer. In practical terms this means an employee can be furloughed in one job whilst still working in the other job. It is important to know employees can start a new job when on furlough (meaning they might end up earning 80% of the old salary and 100% of a new one). The guidance expressly allows for this and does say it has to be allowed under the old employment contract, but we presume the old employer can waive that. You should discuss with your employee what you expect of them regarding availability if they have taken up additional work under this current furlough scheme.
Q: What if an employee is on, or due on Maternity Leave?
A: The same principles apply for all parental leave types but if an employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance then the normal rules apply and they are entitled to 39 weeks of SMP or allowance. Employees who qualify for SMP are still eligible for 90% of their average earnings in the first 6 weeks followed by 33 weeks of SMP or average weekly earnings, whichever is lower. If you offer a company or enhanced contractual pay to women on Maternity leave, this is included as a wage cost you can claim through the scheme.
Q: What do I pay furloughed employees?
A: The minimum you must pay an employee is lower of 80% of their regular wage as at 28th February 2020 or £2,500 a month. An employer can choose to top up an employees’ wage but is not obliged to do so.
For full and part-time employees, the actual salary before tax on the 28th February 2020 should be used the calculate the 80%, this should not include discretionary commissions/ bonuses, tips or benefits in kind (i.e. the value of health insurance or a car).
For employees whose pay varies through zero or irregular hour contracts, then an average pay calculation is required.
If the employee has worked for you over 12 months, you can use either the same month last year or the average monthly earnings in the 2019 – 2020 tax year to calculate the 80%.
If the employee has been employed less than 12 months then you must use an average monthly earning from their start date.
If the employee started in February 2020 (on or before the 28th), use a pro-rata calculation for their earnings.
Q: What about Apprentices?
A: You must pay your Apprentices at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means you must cover any shortfall between the amount you can claim for their wages through this scheme and their appropriate minimum wage. Apprentices on Furlough can continue their training (this and assessment to take place remotely with extensions/breaks granted and recorded wherever possible) as long as it does not provide services or generate revenue for their employer. HM Treasury has confirmed it will not be pausing the apprenticeship levy payments for employers.
Q: Can I claim the NICs and AE Employer Contributions from a Top Up?
A: Employers can top up a furloughed employees’ salary, but any additional top up is not funded through this scheme, therefore no employer can claim for Employer NIC’s or Employer Auto Enrolment contribution top ups. Nor can any voluntary Automatic Enrolment contributions above the minimum mandatory employer contribution of 3% above the lower qualifying earnings limit set at £512 per month until 6th April where it rises to £520 a month.
Q: Do furloughed employees pay Tax and National Insurance?
A: Employees will be liable to Tax, National Insurance Contributions and Auto Enrolment pension contributions, except where they have opted out of auto enrolment.
Q: Do I have to pay the National Minimum (NMW) or National Living Wage (NLW)?
A: Furloughed workers do not work any hours therefore must be paid for the lower amount of 80% of their wage, or £2,500 a month even if, based on their normal hours, this would fall under either NMW or NLW. However, if training is undertaken whilst they are Furloughed e.g. online courses, then they must be paid NMW or NLW for the time spent training, even if this is more than the 80% of wage that will be subsidised.
Q: What if after payment and reimbursement of the grant I find I have overpaid wages, what can I do?
A: If after payment and the relevant reimbursement of the grant a business finds it has over paid wages, a payroll correction is possible in the following period. For example, an over-payment in March payroll can be adjusted in April payroll. This would ensure that employees receive the correct furlough payment over the 2 month period and as such your claim to HMRC would be accurate.
Q: What is the Job Retention Scheme for Contingent Workers?
A: This is a separate scheme to support temporary, agency and consultancy, etc. staff working in the public sector. It has a broader application than the Job Retention Scheme and if you are managing or supplying such workers, you should take advice on this.
Moorepay Product Updates: Available Now!
To help manage furloughed employees through our online payroll & HR software, we’ve developed the following features and updates:
System flag to indicate a furloughed employee
History table to show employee furlough dates
Two new pay codes to support furloughed employees
An average pay calculation to define workers of irregular hours pay
Ability to calculate 80% for salaried employees using February 2020 Salary
Ability to look up previous year for irregular hours workers
Report functionality showing 80% furloughed value, Employers National Insurance and Employers Minimum Auto Enrolment calculations
This new functionality is ready to use. Note that furlough payments can be backdated to 1 March 2020.
To find out more, please don’t hesitate to contact our friendly Moorepay team on 0345 184 4615
**Information in this blog was correct at the time of writing, however with government and legislation changes happening daily some of this may now be out of date.**
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Andrew has a wealth of experience in advising and representing clients of all shapes and sizes in a range of Employment Law topics from unfair dismissal through to all forms of discrimination and the complexities of TUPE. Andrew heads up our Advice Line and Advocacy teams who provide Employment Law advice to our clients 24 hours a day, 365 days a year and support our clients in presenting defences at Employment Tribunals throughout the UK & Ireland.