Last night, the Government released some further guidance on its Coronavirus Job Retention Scheme. There are some useful additional details that have been provided although many questions still do remain unanswered.
I have however set out below details of the further information we do have along with some thoughts on the most popular queries I have been dealing with this past week.
Who can claim?
Previously we were advised that all UK employers could apply under the scheme. This has been further detailed as any UK organisation with employees irrespective of size or sector, including businesses, charities, recruitment agencies and public authorities.
The Government is not expecting public sector employers to use the scheme as the majority of public sector employees are continuing to provide essential public services.
Which employees?
Employers are able to claim for all employees including part-time, employees on agency contracts and those with variable working hours including zero-hours contracts. Employees must have been on the PAYE system on 28 February 2020
What about redundant employees?
I have had a number of questions this week from some businesses who made their employees redundant before the scheme was announced. The government have announced now though that the scheme will cover any employees made redundant since 28 February if they are rehired by their employer.
What is covered within the 80%?
HMRC have confirmed that they will provide a grant to cover the lower of 80% of an employee’s regular wage (see below) or £2,500 per month PLUS the associated employer NI contributions and minimum auto-enrolment employer pension contributions on the subsidised wage.
Further guidance is due to be released on how to calculate the associated costs.
The payments to employees will be taxable and so income tax and NI contributions will be paid as usual on any payments received under the scheme. Employees will also pay their employee auto-enrolment contributions as usual, unless they have previously opted-out of the scheme.
Claims must only be made once every three weeks and may be backdated to 1 March 2020.
What is a ‘regular’ wage?
The cover is for “usual monthly wage costs”. This excludes fees, commission and bonuses.
For those employees whose pay varies, there is a choice. Employers can claim the higher of either:-
- The earnings in the same period in 2019
- The average over the last 12 months (or monthly average for a shorter period for any employees not in the job for the whole year)
In respect of National Minimum Wage (NMW) and National Living Wage, the guidance states that employees are only entitled to the same for the hours they work. As such, anyone that is furloughed, is not working, and so will still only receive the lower of 80% regular wage or £2,500, even if based on their usual working hours this would take them under the NMW/NLW.
An employer can choose to pay the 20% top-up but there is no obligation to under the scheme.
Can you take employees on and off of furlough? i.e. implement a rota system
The guidance is unclear. It states that employees must be on furlough leave for a minimum of three-week blocks to be eligible for funding. There is nothing in the guidance which suggests that an employer can not then rotate with another employee after that three week period. Should we receive any update in this regard, we will circulate.
How to implement furlough leave?
As most employment contracts are unlikely to include express lay-off clauses, an employer MUST ensure they obtain their employee’s agreement before putting them on furlough leave as normal employment and equality laws will continue to apply.
If an agreement is not obtained, an employer could be liable for 100% of an employee’s salary in this period. Most employees are likely to agree to accept the temporary change in status given that the alternatives are likely to be lay-off or redundancy.
Before the guidance was issued last night, my practical advice was to ensure that the agreement is recorded in writing. However the Government have now introduced this as a minimum requirement to be eligible for the scheme – employers will need to write to their employees to confirm they have been furloughed and ensure they keep records of communication.
If sufficient numbers of staff are involved, the Government guidance does state that it may be necessary for employers to engage in collective consultation processes to procure agreement. Further guidance can be provided if this is relevant to your business.
Any employees placed on furlough should not be working at all.
What about employees that are already off self-isolating?
Employees who are currently on sick leave or self-isolating in accordance with Government guidance cannot be placed on furlough during this time. They will continue to receive SSP but they may be furloughed after this.
Any employees that are shielding in line with public health guidance (those in the vulnerable and high risk categories) can be placed on furlough.
What happens to holidays and other benefits?
Holiday entitlement will continue to accrue during any period of furlough leave and additional employee benefits will continue to apply, unless otherwise agreed at the outset of leave.
There is no guidance as yet from the Government as to whether employers can request that employees use their annual leave whilst on furlough leave and there is a question as to what rate of pay an employee would be entitled to during this period.
The Government have also announced this afternoon that in due course they will be publishing The Working Time (Coronavirus) (Amendment) Regulations 2020 which seek to amend regulation 13 of the Working Time Regulations to allow workers to carry over EU holiday (4 weeks) into the next two leave years, where it is not reasonably practicable for them to take the holiday they are entitled due to coronavirus.
The change is aimed at allowing businesses under particular pressure from the impacts of COVID-19 the flexibility to better manage their workforce, while protecting workers’ right to paid holiday.
We will continue to monitor the changing climate and provide legal updates wherever possible. Should you require any further advice in respect of employment-related matters please contact Sharney Randhawa shr@swinburnemaddison.co.uk or Jonathan Moreland jmm@swinburnemaddison.co.uk or contact us by telephone on 0191 384 2441.
