The Coronavirus Job Retention Scheme (the “Scheme”) has been developed by the government to help keep people in employment during the Coronavirus pandemic. The Scheme is not currently set out in legislation, only in a HM Treasury ‘Direction’ and ‘guidance’ which is being regularly updated every few days. The nuances of the Scheme and how it will operate in practice changes almost daily as wrinkles are gradually ironed out and further queries addressed.
These Frequently Asked Questions are provided for information and guidance only and do not constitute legal advice. If you are considering furloughing an employee, or if you are an employee being furloughed, please contact us to obtain the most up-to-date advice on your rights, the circumstances in which the Scheme can be used and how it will operate.
Please note that due to the many changes to the Scheme, there are two relevant dates, being 28 February 2020 and 19 March 2020. Certain parts of the Scheme use one date, the other date or both as being cut-off and calculation points.
Who is eligible to use the Scheme?
Any UK business, including:
- Public and Limited companies
- Sole traders
- Charities etc.
may apply under the Scheme in respect of staff paid through PAYE and registered on payroll on or before 19 March 2020.
Can staff conduct any work for their employer during the furlough period?
Staff must not carry out any work that generates, or could generate, revenue for the employer while furloughed or provide any services to their employer. Employees working reduced hours or working from home do not qualify under the Scheme.
Staff may undertake training courses and activities subject to this not generating any revenue for their employer.
Can employers claim for staff placed on unpaid leave before 28 February 2020?
No. Staff placed on unpaid leave before 28 February 2020 cannot be furloughed until the date you agreed they would return from unpaid leave.
What if employers made redundancies?
Staff that were made redundant on or after 28 February 2020 but were subsequently rehired can also qualify under the Scheme.
It is possible for a previous employer to rehire and furlough an employee who left them after 28 February for reasons other than redundancy, but this is something which requires careful consideration.
Can employers still make people redundant whilst the furlough scheme is operational?
Provided that the redundancy is subject to the correct procedures applicable to the exercise being undertaken, then yes, employers can still make people redundant. We expect that this route will still be followed by some employers who don’t have the cash to pay employees before the grants become available at the end of April.
Can employers claim for directors under the Scheme?
Yes. However, directors topping up low salaries with dividend payments should only receive a grant under the Scheme based on their salary alone. Dividends are not subject to PAYE so these payments are unlikely to form part of the calculation.
Directors may not qualify for the Scheme because due to their management role, they are unlikely to be entirely inactive (the performance of certain statutory duties is an exemption to the rules on activity).
Can employers furlough staff who are self-isolating or shielding?
Staff who are ‘self-isolating’ (either because they have symptoms of the virus or because they live in the household as someone who has symptoms) cannot be furloughed if they are receiving SSP. Furlough may be possible if SSP is not being paid but you should contact us to discuss this in greater detail,
Staff who have been advised to ‘shield’ in line with public health advice (due to serious underlying health conditions) may be furloughed if they are unable to work from home.
Are furloughed staff still employed during the furlough period?
Yes. Where necessary, employment contracts must be varied to reflect the furlough, but the employee’s employment will not be terminated as a result of the furlough.
If I have been furloughed, can I take another job?
Yes, in amended guidance released on 4 April, employees on furlough can take on additional work. However, that second job should be in accordance with the existing employment contract so check if consent is needed.
Can an employer backdate the claim under the Scheme?
Possibly. The Scheme had a backdated commencement date of 1 March 2020 and was meant to assist both employers who had already laid-off/made redundancies and those who were intending to do so. The guidance and rules surrounding furlough have, however, changed on several occasions and it is unclear as to how employers may demonstrate compliance with the requirements of the Scheme for any period before it was announced on 20 March 2020 based on the current wording being used. That being said, it is clear that many aspects of the ‘rules’ have been hastily written and there will undoubtedly be yet more clarification in due course.
How long will the Scheme last?
The Scheme was initially introduced for the period from 1 March to 31 May 2020, but has since been extended to 30 June 2020. It is not known whether there may be any further extension.
If the Scheme terminates on 30 June 2020 can employers still make a claim?
Yes, HMRC will still review claims under the Scheme after this date provided the claim relates to a furlough period within the time limits of the Scheme (i.e. 1 March – 30 June 2020). However, HMRC may decide to impose a deadline for outstanding claims following termination of the Scheme so employers should bear this in mind.
How do employers claim under the Scheme?
HMRC has created a portal to allow online claims under the Scheme. This will be operational from 20 April 2020.
Firstly, the employer and employee must agree to the furlough and changes to the terms of employment. The current wording of the HM Treasury Direction would suggest that an employer cannot unilaterally impose furlough and it is clear that employees have no right to demand furlough. Due to the language used in the latest guidance it is somewhat unclear, however, if an employer’s use of a pre-existing contractual clause relating to lay-off/short-time working is sufficient to amount to agreement to being furloughed.
The employer must write to the employee to confirm they are furloughed and keep a copy of the communications for 5 years.
Earnings, NIC and pensions contributions should be submitted by the employer to HMRC via the online portal.
Employers will need to provide the following information:
- your employer PAYE reference number
- the number of employees being furloughed
- National Insurance Numbers for the employees you want to furlough
- names of the employees you want to furlough
- payroll/works number for the employees you want to furlough
- your Self-Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 consecutive weeks)
- your bank account number and sort code
- your contact name
- your phone number
My employer has just phoned me and told me I am furloughed, can they do this?
See the answer to 13 above. It is possible that the use of a lay-off provision in your contract may allow your employer to furlough you without separate agreement being required. It is also worth noting that the current guidance (17 April) states that, whilst there should be written confirmation of furlough (see below), there is no requirement for an employee to provide a written response to same.
In reality, most people will agree because the alternative may be to face redundancy.
Under the furlough rules, employers must record the decision to furlough in writing. We consider that to include email and arguably, text or WhatsApp. The written records must be kept by the employer for 5 years.
Does the employer pay furloughed staff or does HMRC pay?
The employer pays the staff and it is then reimbursed by HMRC under the Scheme.
My employer has put me on furlough but has said that he doesn’t have the money to pay me. Where do I stand?
Under the rules of the Scheme, the government will pay the salaries or wages of employed people who were, subject to certain requirements, on PAYE on 19 March 2020 (provided the employer has a UK bank account and has enrolled for online PAYE). However, given the size and complexity of the Scheme, it is likely that there may be problems in payments being processed within the stated timescales (6 working days from the date a claim is made by the employer) so, in the meantime, employers are required to make the payments and seek later reimbursement from HMRC – though your employer may ask you to defer your wages until they have received funds.
If you have not been paid by your employer, then unfortunately there is not much that you can do. Whilst you may have a claim for unpaid wages from your employer there are two issues in actually obtaining any money. Firstly, your case needs to be heard by the county court or employment tribunal. Both bodies are hearing very few cases at the moment and in any event, waiting times for hearings are long. Secondly, if your employer simply does not have the cash, they cannot physically pay you.
It may be that they are seeking assistance through the other means set out by government to support business by way of loans and so your employer may be able to pay you soon. However, you are likely to have to be patient.
How long will staff be on furlough leave?
This will be determined by the employer depending on the needs of the business but the minimum amount of time staff must be on furlough leave is 3 weeks in order to claim under the Scheme.
What happens to annual leave entitlements whilst furlough is in place?
The government provided some clarification on this point on 17 April, although it has stated that it is keeping this issue under review. However, the current position appears to be that furlough does not interrupt the annual leave year, meaning that employees can both take and accrue annual leave whilst on furlough – although if annual leave is taken whilst on furlough, the employer will need to ‘top up’ the payment to the employee’s usual rate. Note also that the government has relaxed the rules to remove the obligation on employers to ensure that all employees take their statutory minimum amount of holiday in each year so as to allow up to four weeks of annual leave to be carried over for up to two years.
How much will employers receive from the Scheme?
Provided employers are making valid claims, they should receive a grant of 80% based on the employee’s salary before tax as at 28 February 2020 (or 19 March 2020 depending on payroll dates) subject to a cap of £2,500 per month.
In addition, employers can claim employer’s National Insurance Contributions and employer’s minimum auto-enrolment pension contributions in relation to that 80% (i.e. 3%).
Please note that payments received from HMRC under the Scheme are to be treated as income within the employer’s calculation of taxable profits. HMRC may also audit claims made under the Scheme at a later date and seek recovery of monies where there have been breaches of the scheme ‘rules’ made deliberately or in error.
How much will staff receive from their employers?
This will depend upon the exact arrangements made with individuals. Employers must, however, ensure that any monies received by them from HMRC under the Scheme are paid to their employees.
What if the grant received takes staff below the National Minimum Wage (NMW)?
This is OK. NMW does not apply because it is based on working time and the furloughed workers should not be spending any time working. There are some slight nuances to this in respect of time spent training, but it is unlikely that this will present any issue to the vast majority of employers.
Are employers required to pay 20% to top the wages up to 100%?
There is no obligation for the employer to agree to top up wages beyond the 80% they can claim under the Scheme (capped at £2,500). This will be a matter of discussion and negotiation but, in most cases, will be dictated by the employer’s ability to pay any additional sums. Although there may be certain legal issues arising from this, the reality is that 80% is likely to be better than nothing if the employer is struggling financially.
Can employers rotate the staff that are on furlough?
Yes. However, the minimum period for which an employee may be on furlough leave is 3 weeks. Be aware also that the scheme currently ends on 30 June 2020.
I am employed by a local authority but they will not put me on furlough leave, is this right?
Yes, in the majority of cases this is right. It is because the furlough rules impose strict conditions on the ability of publically funded bodies to offer furlough.
My employer has said he is not participating in the Scheme, can he do that?
The Scheme is designed to preserve jobs and businesses but it is not obligatory. So there is no obligation on an employer to participate in the scheme and offer furlough leave to its employees. In that situation, if there is no work and the employer does not have the funds to pay you, you may be at risk of redundancy.
Some of my employees have company cars and have complained that they are still paying tax on a benefit they cannot use. What can I tell them?
Unfortunately, the news is not good for those people. The Scheme does not provide for anything other than wages/salary, fees and compulsory (i.e. contractual) commission or bonus payments. It excludes things such as benefits in kind and tax thereon.
Written by the employment team