Which employees are eligible under the Coronavirus Job Retention Scheme?
In order to be an eligible employee in line with the scheme, furloughed employees must have been on your PAYE payroll on or before 19 March 2020, and include:
• full-time employees
• part-time employees
• employees on agency contracts
• employees on flexible or zero-hour contracts
The guidance has confirmed that foreign nationals on all categories of visa are eligible to be furloughed.
The guidance states that employers can only claim for furloughed employees that were employed on 19 March 2020 and were on the PAYE payroll on or before 19 March 2020. This effectively means that an RTI submission notifying HMRC of payment in respect of that employee must have been made on or before 19 March 2020.
As well as employees, the grant can be claimed for any of the following groups, if they are paid via PAYE:
· office holders (including company directors)
· salaried members of Limited Liability Partnerships (LLPs)
· agency workers (including those employed by umbrella companies)
· limb (b) workers
The guidance sets out specific considerations for those individuals who are paid via PAYE, but who are not necessarily employees in employment law. Unless explicitly set out in the government guidance of this scheme, all other guidance is applicable to these cases, and should be followed.
Can an employer re-employ and furlough an employee who has been made redundant?
The guidance confirms that employers who made employees redundant, or the employees stopped working for the employer on or after 28 February 2020, can be re-employed and placed on furlough leave. Employers can then claim for their wages from the date in which the employer furloughed them, even if the employer did not re-employ them until after 19 March 2020. This applies providing the employee was on the employers PAYE payroll as at 28 February 2020, which means that an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020.
The guidance also covers those made redundant or who stopped working for their employer after the 19 March 2020 as follows.
Employers who made employees redundant, or the employees stopped working for the employer on or after 19 March 2020, can be re-employed and placed on furlough leave. Employers can then claim for their wages from the date in which the employer furloughed them. This applies providing the employee was employed on 19 March 2020 and on the employers PAYE payroll on or before 19 March 2020, which means that an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.
Can an employee on a fixed term contract be placed on a period of furlough leave?
Yes, an employee on a fixed term contract can be placed on a period of furlough leave. Employees on fixed term contracts can also be re-employed and then placed on a period of furlough leave and employers in these circumstances can claim for either of the following situations:
- the employee’s contract expired after 28 February 2020 and an RTI payment submission for the employee was notified to HMRC on or before 28 February 2020.
- the employee’s contract expired after 19 March 2020 and an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020.
HMRC guidance states that if the employee’s fixed term contract has not expired, it can be extended or renewed, and the employer can then make a claim for this individual if an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020. Employees that started and ended their fixed term contract between 28 February 2020 and 19 March 2020 will not qualify for this scheme. This would equally apply to employees on all other types of contract.
How do I obtain agreement from employees to place them on a period of furlough leave?
The HMRC direction states that in order to be furloughed an employee must have been informed to cease all work in relation to their employment and that this point will only have been met if the employer and employee have agreed in writing that the employee will cease all work (agreement can be via email/letter). The guidance, however, states that employers only have to confirm in writing to employees that they have been furloughed and obtain employees’ agreement to any changes to their contract. It states that there needs to be a written record but the employee does not have to provide a written response. As the Direction forms part of legislation, employers may wish to contact the employees that they have furloughed and seek written agreement to be placed on furlough and confirm that they agree to ceasing work for them during this period, however the latest version of the HMRC guidance was published after the HMRC Direction and therefore if HMRC were to refuse claims on this basis then there is potentially an argument that this decision could be challenged.
Changing the status of an employee to a furloughed worker is a contractual variation and therefore we would advise that agreement (via a written furlough worker agreement) should be sought from employees for this to happen, contracts cannot be amended unilaterally. Therefore, unless there is a relevant clause within the employee’s contract of employment to cover this situation (and in any event best practice would be to consult and obtain agreement), you would need to obtain an employee’s agreement (ideally in writing) to do so.
If your contract of employment does not have a specific lay off clause giving you the right to lay off employees with no pay then you will need to seek the agreement from employees to only pay 80% of their salary, if employees do not agree to this then you will have to pay 100% of their pay and claim back 80% through the CJRS. Where you are unable to obtain agreement, the other option is to consider starting a redundancy procedure.
If you have 20 or more employees that this would affect, keep in mind that you may have collective consultation obligations in the event of proposing to dismiss employees (this includes redundancies as well as dismissing and re-engaging for the purposes of varying a contract of employment).
Do I need to put anything in writing to an employee regarding the furlough leave period?
Employers should discuss with their employee regarding any proposal to place them on a period of furlough leave and look to seek their agreement to this.
To be eligible for the scheme employers should write to their employee confirming that they have been furloughed (and obtain their agreement to this) and keep a record of this communication for a period of 5 years. We would therefore advise that a written furlough worker agreement is implemented, please contact the HR team if you would like a template.
Can my employee undertake any work whilst on a period of furlough leave?
An employee must not undertake work for or on behalf of your organisation. This includes providing services or generating revenue for the business, or any organisation linked or associated with your business.
The guidance states that if an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed. For example, if you have placed an employee on a short time working arrangement and they continue to undertake this, then they would not be eligible as part of the scheme as they would still be undertaking work for the organisation.
How much of an employee’s pay can be claimed back from the Government in line with this scheme?
Employers can use a portal to 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.
You can claim for any regular payments you are obliged to pay your employees. This includes regular wages, non-discretionary overtime, non-discretionary fees, non-discretionary commission payments and piece rate payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded. Non – monetary benefits (for example benefits-in-kind) are excluded, as re benefits provided through salary sacrifice.
The guidance states that the reference salary should not include the cost of non-monetary benefits provided to employees, including taxable Benefits in Kind. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary. Where the employer provides benefits to furloughed employees, these should be in addition to the wages that must be paid under the terms of the Job Retention Scheme. If employers need to stop any contractual benefits during this time, then they should consider whether they have the relevant contractual right to do so within the employee’s contract of employment or seek agreement from employees. In these circumstances, we would advise seeking guidance on the process to follow.
Normally, an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements, if the relevant employment contract is updated accordingly.
In order to make use of this scheme do I have to furlough all employees immediately?
You do not need to furlough all of your employees in order to make use of this scheme. When considering whether to furlough an individual it is important to consider whether or not the Company and their role have been significantly affected by Covid-19. The purpose of the scheme is to protect employees’ employment and to minimise/avoid organisations having to either lay off employees or to consider compulsory redundancies, as a result of the impact of Covid-19 on organisations.
Employers can use this scheme anytime during the period in which it is in place for, which is currently until 30 June 2020, although it may be extended.
Can I furlough an employee who is currently on sick leave or self isolating?
Employees on sick leave or self-isolating will be able to receive Statutory Sick Pay (subject to usual eligibility requirements) during this period (or sick pay arrangements in line with normal Company policy). The government guidance states that short-term illness/self isolation should not be a consideration in deciding whether to furlough an employee. If, however, employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive sick pay and would be classified as a furloughed employee instead.
Can I furlough an employee who has received a letter from a medical adviser stating that they need to self-shield for a 12-week period?
Yes, employers are entitled to furlough employees who are being shielded (or they need to stay at home with someone who is shielding) or off on long term sick leave. The guidance states that it is up to employers to decide whether to furlough these employees. Employers can make a claim through the CJRS and the SSP rebate scheme for the same employee but not for the same period of time. Therefore, when an employee is on a period of furlough leave employers can make a claim through the CJRS but not the SSP rebate scheme.
What happens if an employee falls unwell during a period of furlough leave?
If an employee becomes unwell during a period of furlough leave, the government guidance states that an employer is not obliged to end the period of furlough leave and place the employee on sickness absence instead (for example SSP), however they can choose to do so.
If a furloughed employee who becomes unwell is moved across to SSP, then the employer is no longer able to claim for the furloughed pay through the CJRS. Employers are required to pay SSP themselves. If employers keep unwell furloughed employees on the furloughed rate, they will remain eligible to claim for these costs through the CJRS.
Can I place an employee on a period of furlough leave, who commenced their employment with the Company on 20 March 2020?
Employees who commenced employment with the organisation on/after 20 March 2020 cannot be furloughed or claimed for in accordance with this scheme.
Do employees still accrue holiday during a furlough leave period?
Yes, statutory annual leave will continue to accrue as normal during a furlough leave period.
Contractual annual leave in excess of the statutory minimum will also continue to accrue, unless the contract specifically provides otherwise. We have included relevant wording within our template furlough worker agreement in relation to this.
The Government has amended regulation 13 of the Working Time Regulations 1998 in relation to statutory holiday entitlement in order to allow workers to carry over up to 4 weeks’ annual leave into the next two leave years to assist with the impact of Covid-19 on holiday entitlements and the ability to take leave. The additional 1.6 weeks can already be carried forward in to the next leave year if agreed by both parties.
Can an employee exhaust holiday whilst on furlough leave?
The HMRC guidance states that an employee can take annual leave whilst undertaking a period of furlough leave and that employers must top up pay to their normal rate of pay (or where the rate of pay varies this should be calculated on the basis of the average pay received by the employee in the previous 52 working weeks) for any period of holiday. Therefore, instead of paying 80% of wages they must pay a 100% of normal remuneration on days taken as annual leave during the furlough leave period.
If employers are not in a financial position to be able to afford paying employees in full for annual leave whilst they are furloughed, then employers can refuse any holiday requests during this period by providing the required notice. Employees should then be allowed to take their holiday at a later date in the year or carry it over in to the next holiday year.
At present, the guidance does not provide definitive guidance on whether employers can enforce employees to take annual leave during a period of furlough leave by providing the required statutory notice. Therefore, if an employer would like employees to exhaust holiday during their furlough leave period then they should consult with those individuals and attempt to seek their agreement to the approach taken.
If employees usually take bank/public holidays as part of their statutory leave then the employer will need to either allow them to take these days as annual leave during the furlough leave period as normal, and top up their pay to the usual rate of pay for holiday purposes, or provide the employee with a day off in lieu at a later date.
What happens if an employee has more than one job?
If your employee has more than one employer, then they can be furloughed for each of the jobs that they undertake. Each job is separate, and the cap applies to each employer individually.
Employees can be furloughed in one job and receive a furloughed payment but continue working for another employer and receive their normal wages.
Can my employee get a new job whilst they are on furlough leave with my company?
If contractually allowed, your employees are permitted to work for another employer whilst you have placed them on furlough, in line with the government guidance on the scheme. It is common for relevant clauses within an employee’s contract to state that they may not undertake work for another organisation unless express permission is obtained from the company.
How should I select employees to place them on a period of furlough leave?
HMRC guidance states that the organisation should ensure that it follows a fair procedure in order to select employees for furlough leave and that decisions made are in line with the usual requirements of equality and discrimination legislation and best practice. Employers should also consider whether it would be possible to request volunteers.
We would advise that employers keep a record of the reason/decision made to furlough employees.
Can an employee become a volunteer whilst undertaking a furlough leave period?
The guidance states that a furloughed employee can take part in volunteer work, as long as it does not provide services to or generate revenue for, or on behalf of your organisation or a connected organisation. It is advisable for employers to consider implementing a policy/guidance in relation to the emergency volunteering legislation, issued by the Government, as part of measures being taken to manage the impact of Covid-19.
Can an employee undertake training during a furlough leave period?
HMRC guidance states that a furloughed employee can take part in training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation or a linked or associated organisation. The government guidance states furloughed employees should be encouraged to undertake training.
However, if workers are required undertake training at the request of their employer, whilst they are furloughed, then they must be paid at least their appropriate NLW/NMW rate for the time spent training, even if this is more than the 80% of their wage that will be subsidised. The NLW/NMW increases from 1 April 2020 must be taken in to account for any time spent training.
Can apprentices be furloughed?
Yes, apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.
However the guidance states that, 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. The AMW/NLW/NMW increases from 1 April 2020 must be taken in to account for any time spent training.
Guidance is available for changes in apprenticeship learning arrangements because of COVID-19.
Can you furlough an employee who is currently on maternity leave?
The HMRC guidance appears to suggest that an employee may be furloughed if they are on maternity leave or other family related leave, however definitive guidance is being awaited on this point. It does not state that an employee would have to end their maternity leave and then be placed on a period of furlough leave.
The HMRC Direction states that a claim under the CJRS can’t include amounts already payable to the employees such as SMP and that these sums should be deducted from the total amount being claimed under the scheme. This therefore seems to suggest that an employee can be placed on a period of furlough leave whilst on a period of maternity leave.
The government guidance states that normal rules apply with regards to SMP and leave provisions. Employees are required to take the first 2 weeks (or 4 weeks if a factory worker) immediately following the birth of their baby, as maternity leave, for health and safety reasons. Employees are entitled to the first 6 weeks of their maternity leave to 90% of their earnings, followed by SMP, or 90% of their earnings if this is lower, for a further 33 weeks. Employers can recover 90% of SMP (or 103% if they are a small employer).
Employers may therefore find that where an employee has finished their maternity paid period, they may contact the employers and request to end their maternity leave period (by providing the required 8 weeks’ notice) and be placed on a period of furlough leave instead, as this would mean they could receive 80% of their wages (up to the cap of £2,500 per month). However, the HMRC guidance does not provide definitive guidance as to whether or not the employer could make a claim under the CJRS in this situation and it is likely that the employee would not be able to return to maternity leave at the end of the furlough leave period.
How should I calculate what to pay an employee returning from family-related leave?
HMRC guidance confirms that employees (on fixed pay and those who are full/part-time) returning from a period of family-related leave should have their pay calculated in line with other employees and should be calculated against their salary, before tax, not the pay they received whilst on statutory leave.
Claims for those on variable pay, returning from statutory leave should be calculated using the highest of either of the following:
- same month’s earning from the previous year
- average monthly earnings for the 2019-2020 tax year.
How should I calculate what to pay an employee returning from sickness absence?
The HMRC guidance states that employees (on fixed pay and those who are full/part-time) returning from a period of sickness absence should have their pay calculated in line with other employees and should be calculated against their salary, before tax, not the pay they received whilst on sickness absence.
Claims for those on variable pay, returning from a period of sickness absence should be calculated using the highest of either of the following:
- same month’s earning from the previous year
- average monthly earnings for the 2019-2020 tax year.
Can an employer choose to pay 100% of an employees pay, whilst they are undertaking a period of furlough leave?
As a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can choose to top up an employee’s salary to 100% but is not obliged to under this scheme. If an employer does not intend on topping up the employees pay to 100%, then the employer must obtain the employees agreement to the reduction in pay, unless it has the contractual right to lay-off employees with no pay or reduced pay.
Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3% of income above the lower limit of qualifying earnings (which is £512 per month until 5th April and will be £520 per month from 6th April 2020 onwards).
How do I calculate an employee’s pay for the purposes of this scheme?
The HMRC guidance states that for full time and part time salaried employees, the employer should use the employees pay in the last pay period prior to 19 March 2020 to calculate the 80%.
For an employee whose pay varies, if the employee has been employed for a period of 12 months or more prior to the claim, you can claim for the higher of either:
• the same month’s earning from the previous year; or
• average monthly earnings from the 2019-20 tax year
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work. If the employee has been employed for less than a month, then the guidance states that the employer should calculate what the employee would earn in a month based on their pro-rated earnings to date.
Once the employer has calculated how much of an employee’s salary can be claimed for via the CJRS then they must calculate the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions they are entitled to claim.
Are employees entitled to national minimum/national living wage whilst on furlough leave?
HMRC guidance states that individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working or treated as working under minimum wage rules.
Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500 even if, based on their usual working hours, this would be below NLW/NMW.
However, if workers are required to undertake training as requested by their employer, whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
What employment rights do employees have whilst on furlough leave?
Employees that have been furloughed have the same rights as they did previously and this includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments. Terms and conditions of employment and continuity of employment will not be affected during this period.
Can you make an employee redundant whilst they are on a furlough leave period?
Yes, providing you follow a fair procedure in line with current employment law legislation and best practice, you can make an employee redundant whilst they are undertaking a period of furlough leave or when they return from a period of furlough leave.
What happens if an employee refuses to be placed on a period of furlough leave?
If an employee refuses to be placed on a period of furlough leave then the organisation will need to consider alternatives, which may be to place them on a period of lay off or short time working (providing there is a relevant clause within the contract of employment to do so) or consider implementing a redundancy process. In either of these situations, it would be advisable to seek guidance from the HR team on the process to follow.
Can an employer rotate employees who are furloughed?
Yes, employees can be rotated to be placed on a period of furlough leave and can be furloughed multiple times, providing that each separate instance is for a minimum period of 3 consecutive weeks.
Is there a minimum period of time which an employee has to return to work for following a period of furlough leave before they can be re-furloughed?
No, in theory an employee could request an employee to return to work for one day and then re-furlough them, providing that each period of furlough leave was for a minimum period of 3 weeks.
What happens in TUPE situations/change of ownership?
The guidance states that a new employer in these situations will be eligible to make a claim under the CJRS in respect of employees of a previous business transferred after 28 February 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.
Can an employer furlough an employee who needs to stay at home and look after their children?
Yes, HMRC guidance states that employees who are unable to work due to caring responsibilities which have been impacted as a result of Covid-19 can be placed on a period of furlough leave. There is also no requirement, in line with the guidance, for the employer to evidence an adverse economic effect on the organisation from Covid-19. If the employee is not able to work due to the impact of Covid-19 on personal caring responsibilities, then they will be able to be placed on a period of furlough leave.
If you would like to speak to a member of HR team, please contact us.