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Update – FAQ from Employers Relating to the Job Retention Scheme

So, as we start another week, that looks so very different to our lives just a couple of weeks ago, the purpose of this guide is to provide a roundup of furloughing and all the associated questions that arise. Whilst it is a non-exhaustive list we hope that it will provide some guidance to assist your business in taking the right steps, making the rights decisions and ensuring that you are using the government’s Job Retention Scheme to protect the employment of your people at this worrying time? If your question remains unanswered, please do not hesitate to contact us. Please be mindful that government guidance is being updated continually so we can only ensure that this is correct at the time of writing and publishing.

What organisations can claim?

The scheme is for “employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.” As a general starting point, you should determine what you need to do as a business in order to survive during this period, separate to any consideration of the Scheme.  If staff lay-offs or redundancies are financially unavoidable, we would expect you to be covered given the aims of the Scheme.

Any UK organisation who has a PAYE payroll system on 28 February can apply to the scheme.  The only exception to this would appear to be organisations that are publicly funded.  The intention is that all public sector employees continue to receive funding and providing public services in the same way as before.  The public funding will continue and accordingly there will not be access to the scheme for those organisations.  There are a number of organisations who have closed and have a mixture of private and public income for whom the outcome is not clear at the moment.

How do we claim?

The portal will be launched on 20th April 2020. You should take the action that is necessary for your business, bearing in mind that the Job Retention scheme is available.  So, consult with your staff and seek the agreements you need to ‘furlough’ them under the government scheme.  If you were considering full redundancies rather than layoffs, consider using the furlough option instead.  Consider your cash flow situation for your next payroll, based on the 80% of salary (capped at £2500) that you can receive back as a grant.  Decide whether you can top up salaries and to what level (if at all) and confirm the arrangements in writing to your employees.  Then determine whether your cash flow will enable you to make payments on time as part of your normal payroll cycle, or whether you will need to defer payment until the grant can be claimed and received before paying your employees.  You must inform and agree with them if payment is to be delayed.

How much can be claimed?

 Employers can claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.  More details on how to calculate will be issued shortly.

  • You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account. You must also enrol – if you have not already – for PAYE online.
  • Furloughed employees must have been on company PAYE payroll on 28 February 2020.  Employees hired after 28 February 2020 cannot be furloughed.
  • Regular past overtime can be included in claims along with wages, fees and compulsory commission payments.
  • Discretionary bonuses, tips, commissions and non-cash payments should be excluded.
  • All of the grant must be paid to employees as gross salary.
  • The reference salary must not include the cost of non-monetary benefits including taxable benefits in kind, including those provided through salary sacrifice.  Where benefits are provided, they should be in addition to wages paid under the scheme.
  • However, HMRC agreed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements.  This means that contractual changes can be agreed to forego the benefits and increase the reference salary.

Can I pay some furloughed employees more favourably than others?

You should be consistent to ensure that you are not at risk of behaving in a discriminatory way.  If you plan to top up the earnings of some employees to 100%, then we recommend you do this evenly across your employees.  You are not required to top up to receive the grant.

What individuals can you claim for?

The scheme covers the following individuals, whether they are employees or workers provided that they were on your PAYE payroll on 28 February 2020:

  • Full-time employees.
  • Part-time employees.
  • Employees on agency contracts.
  • Employees on flexible or zero-hour contracts.
  • Employees on a fixed term contract
  • Foreign nationals are eligible to be furloughed. Grants under the scheme are not counted as ‘access to public funds’, and you can furlough employees on all categories of visa.

What about zero hours contracted people and agency workers?

Although the guidance from the HMRC talks about “employees” a lot, the scheme does cover agency workers, workers and those on zero hours contracts.  The test appears to be simply that the individual was on the PAYE payroll on 28 February.

Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through the scheme, including where they are employed by umbrella companies.

What if we have already made them redundant?

Employees who were made redundant since 28 February 2020 can qualify if they are re-engaged by their former employer.  There is no obligation to re-engage but there will be no access to the funding scheme if you do not do so.

What about TUPE?

A new employer is eligible to claim under the CJRS in respect of the employees of a previous business transferred after 28th February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.

What if we placed them on unpaid leave?

If the individual was placed on unpaid leave before 28 February, the scheme will not apply.  It only applies if unpaid leave commenced after 28 February 2020.

Can we furlough an employee who is taking unpaid leave to look after their young children who are now at home due to school closures?

Government guidelines state that “employees who are unable to work because they have caring responsibilities resulting from coronavirus (COVID-19) can be furloughed. For example, employees that need to look after children can be furloughed.”

Can I rotate employees on furlough?

 If a business is still operating, but at a reduced capacity, rather than reducing the hours of those employees (under which you cannot get any financial support under this scheme) you will need to reduce the number of employees working. You can rotate employees on furlough, but you must ensure that you do so no faster than a 3-weekly rotation as the scheme is only applicable for those who are furloughed for 3 weeks or more. The JRS is not intended for short-term absences.

What if we have an emergency or sickness that requires us to recall a furloughed employee?

Where an employer is running a rotation scheme (as above) they may of course be faced with the situation where they then need more than the planned for number of employees for a number of reasons, whether this be more work than planned for or, of course, sickness or self-isolation requirements of those who are working. However, if you do this before they have spent 3 continuous weeks on furlough the business will not be able to claim under the scheme.  It will of course have already contracted with the employee to pay them their 80% and accordingly the business will lose financially as a consequence.  You therefore need to ensure that you retain good records of how long individuals have been on furlough and make business informed decisions before recalling individuals on furlough.

Can we do the same for long-term sick employees?  Can they boost their pay to 80% instead of receiving sick pay (statutory and/or company) or no pay at all?

If an employee is in receipt of statutory sick pay the employer cannot furlough them.  This means that any employee on sick leave of any sort cannot access the 80% payment unless they have already ceased receiving SSP.

What about maternity leave (and other forms of family leave)?

An employer can claim enhanced contractual maternity (and other family friendly) pay through the furlough scheme. This suggests that employees can furloughed and on maternity (or other family) leave at the same time. Employers who have employees on maternity (or other family-related) leave and in receipt of pay in excess of the minimum statutory payment will want to ensure that they make a claim for the difference.

What about those that are extremely vulnerable and “shielding”?

The exception to the rule that those on SSP cannot be furloughed is the provision made in the guidance for the extremely vulnerable individuals who have been instructed to shield themselves.  The NHS has been writing to those affected individuals to ensure that they are aware of the requirement for them to shield themselves from others.

The HMRC guidance states that: “Employees who are shielding in line with public health guidance can be placed on furlough”.

What if someone falls ill whilst furloughed?  Sick pay or furlough pay?

Some employees may want to be absent due to sickness if the contractual sick pay scheme provides for a higher level of pay than the furlough scheme. They will remain entitled to receive sick pay in accordance with the contractual rules of their scheme.

What if someone has resigned?

The fact that the scheme is only open to individuals who were on the PAYE payroll on 28 February 2020 is causing serious consequences for people who were in the process of changing roles and employers. Many employers are seeking to delay the start date of new employees because they are not covered by the scheme, but do not actually wish to lose out on the recruited person in the long run.  Of course, the individual will have already handed in their notice at their existing employer and that employer will be very unlikely to want the individual to continue in employment as they may be looking to reduce headcount and cost.

During the notice period, the individual can of course be furloughed in the normal way, although there is no right or entitlement to this. If they have already left employment though the position is less clear.  The guidance states that anyone who was made redundant or stopped working for you after 28 February 2020 can be re-engaged and placed on furlough.  Of course, whether an employer actually wishes to do this or not is entirely up to them.

Can we lawfully make employees redundant whilst the furlough scheme is available?

To make an individual employee redundant lawfully and fairly you must still be able to meet the normal legal tests.  One of these tests is whether there is any alternative to dismissing that individual by reason of redundancy.  Given the existence of the Job Retention Scheme if you dismissed an employee as redundant before 31 May 2020 and they were willing to be furloughed, then this dismissal may be found to be unfair.  This does not mean that you cannot commence redundancy process.  You can undertake all the other relevant consultation requirements of the redundancy, place the employee on furlough (with their agreement) and then revisit the situation at the end of May.  If the scheme ends (as it is currently scheduled to do so) and there remains a redundancy situation, then the dismissal can be affected at this time as the alternative (furloughing) will no longer be available to the employer.

Holiday and furlough?

The normal statutory holiday (5.6 weeks) will accrue during furlough as normal.  Some employers though have taken steps to provide that contractual holiday which is over and above the statutory entitlement does not accrue.  If you wish to do this, then it must be expressly set out in the furlough agreement with the employee.

New emergency legislation was passed on 26 March to enable employees to carry over their statutory holiday from one year to the next without breaching the normal provision of the Working Time Regulations that would otherwise prevent this. The carry-over of holiday is restricted to the “euro leave” of 4 weeks (not the 5.6 weeks of full UK statutory leave).  It is only to be permitted to carry over that leave in circumstances where the effects of COVID-19 have prevented the taking of the holiday.

Taking holiday may be attractive to someone on furlough as it means that they can ensure that their income returns to their normal level of pay.  However, the problem that may arise is whether by taking annual leave it interrupts the period of furlough – which must last for at least 3 weeks for reimbursement to be made.  Further, even if the scheme does permit a claim in such instances, employers will need to be mindful that they will still need to meet the cost between the 80% reimbursed and the actual amount required to be paid under the contract for holiday.

 The employer can give notice to take statutory holiday after the furlough period has ended in accordance with the notice requirements set out in the Working Time Regulations.  The notice must be at least twice the length of the period of leave that the worker is being ordered to take

Given the problems that can arise if annual holiday is taken during a furlough period, employers should cancel all holidays that were previously booked by employees. It may be advisable to treat bank holidays in the same way.

What can my employee do during furlough?

The guidance now expressly states that employees can go and work for other employers during their period of furlough. A condition of the scheme is that they cannot do any work for the employer that is furloughing them. They can though undertake training during this period.  If they do undertake any training, you must ensure that they continue to receive the National Minimum Wage during these hours. This is the only time any employer needs to be concerned whether the 80% that is paid is above the NMW. They can do voluntary work, but this cannot be for the employer furloughing them.

For more advice and practical support during these difficult periods, please contact Clover HR on 0121 516 0299 or email us at info@cloverhr.co.uk


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