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March 30, 2020
COVID-19: Job Retention Scheme FAQs
On Friday 20th 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 26th March 2020, further details were released by the government and those can be found here.
Below is based on the latest information we have about the scheme, we will continue to update this document as necessary.
Q: What is the COVID19 Job Retention Scheme?
A: It is a scheme that will allow 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 COVID19 outbreak.
Q: Which Companies does it apply to?
A: All UK business, so limited companies, sole traders, LLP’s, partnerships and charities recruitment agencies (agency workers paid through PAYE) who had created and started a PAYE payroll scheme on 28th February 2020 and have a UK bank account.
Q: Which employees does this apply to?
A: This applies to all employees who were employed on or before 28th February 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 COVID19 Job Retention Scheme. They are workers who are paid via PAYE, but are temporarily not working during the COVID19 outbreak.
Q: When does the grant start?
A: It starts immediately and will be backdated to 1 March 2020. It’s initially for a period of 3 months. The indications are that payments from HMRC to employers will be in place by the end of April 2020.
Q: How do I claim the money?
A: Currently HMRC does not have a process for paying employers, this is being set up via a new online portal which is expected to be available by the end of April 2020. You will need to make any payments yourself and will be reimbursed. You will only be able to submit one claim every 3 weeks, claims can be backdated to 1st March 2020.
Q: What if I cannot afford to pay any salary to these workers whilst waiting for the grant?
A: Visit this page for more details of support available to businesses during this time.
Q: How much can I claim?
A: 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, or £2,500 per month, plus the associated Employer National Insurance Contributions (NICs) and minimum Automatic Enrolment employer contributions. Fees, commission and bonuses should not be included in the grant claim. The HMRC have yet to issue guidance on the calculation for Employers NICs and minimum Automatic Enrolment employer contributions and as soon as they do, we will update our information.
Q: How long do employees need to be furloughed?
A: The scheme is designated as lasting at least 3 months from March 1st 2020 and the minimum amount of time an employee can be furloughed is 3 weeks. In practical terms this means if you have work to be completed, we would recommend assessing if you have a minimum of 3 weeks work available, then assess how many employees you might need to perform that work within those 3 weeks and if possible, look to rotate employees off and possibly back onto Furlough status in minimum blocks of 3 weeks at a time. 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 on reduced hours be furloughed?
A: No employees who are working, on reduced hours and for reduced pay will not be eligible for the Furlough scheme and you should continue paying them through your payroll as normal under the terms of their contract.
Q: What do Businesses need to do Immediately?
A: Designate affected workers as Furloughed Workers and notify them of this change in writing. This process may be subject to “meaningful consultation” if you do not have a contractual clause that allows for the “right to remove work” i.e. a contractual right that states you are able to vary the existing terms and conditions simply by notifying the workers. This means if you do not have this contractual right, 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 or even redundancy, it is highly probable that most workers will agree to being furloughed. 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. It would be wise however in any event, to ask the employees to accept the changes proposed in writing, to ensure you have the relevant recorded documentation.
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 COVID19 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 COVID19 Job Retention Scheme). Please take advice on this question before taking any action.
Q: What if I have laid off workers, placed employees on short time working or have given them notice of redundancy before the Government’s 20 March 2020 announcement?
A: Engage your workers as soon as possible to either notify them they are now a Furloughed Worker or begin meaningful consultation with a view to agreeing in writing as soon as possible that they move to becoming a furloughed worker. More guidance is needed from the Government around whether workers dismissed for redundancy due to coronavirus closures since 1 March can be re-hired and furloughed.
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 COVID19 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 COVID19 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 COVID19 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 COVID19 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 COVID19 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 COVID19 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 HRMC.
Note that individuals need to have been on payroll on 28 February 2020 to qualify under the scheme.
Q: Does the COVID19 Job Retention Scheme apply to “Self Employed Sub-Contractors”?
A: No. The government have announced separate provisions for the self-employed under the coronavirus (COVID-19) Self-employment income support scheme, further details on that scheme can be found here.
Q: What if a Furloughed Worker becomes unwell?
A: The advice at this stage is the normal rules in relation to incapacity for work will apply for employees and workers. Isolation or fit notes are now able to be obtained from NHS 111 online. If an employee or worker provides you with that 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 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.
Q: What should holidays for Furloughed Workers be paid at?
A: The advice at this stage is the normal rules in relation to holidays, holiday accrual, holiday carry over and holiday pay 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. If you don’t currently have access to our HR, Employment Law and Health & Safety Advice Line and would like to find out how we can support your business, please speak to your commercial account manager or telephone 0345 184 4615.
Q: Can an employee do any work while Furloughed?
A: No, an employee can not undertake any work on or behalf of the organisation either providing services or generating revenue. 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 3 weeks.
Q: Can I bring back furloughed workers if I have work for them?
A: You can bring back workers but only to their full substantive hours after the minimum 3-week period – remember there’s no scope for being furloughed part time, returning on reduced hours will be paid on those new hours with no ability to claim a grant.
Q: What about employees on unpaid leave?
A: Employees on unpaid leave cannot be furloughed unless they were placed on unpaid leave after 28th February 2020.
Q: What if a employees 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 COVID19 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.
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 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 fees, commissions or bonuses.
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: 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.
Moorepay Product Updates: Coming Soon
To help manage furloughed employees through our payroll & HR software, we’re currently developing the following features and updates:
System flag to indicate a furloughed employee
History table to show employee furlough dates
Three 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
An automatic notification to employee classified a furloughed worker
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 planned to be delivered in line with HMRC’s portal go-live date of 30 April 2020. 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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Ask Moorepay for expert advice on all things payroll and HR.
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.