Update: The deadline to place new employees on furlough who have so far not been on the Coronavirus Job Retention Scheme was the 10 June 2020. In this guide we provide details in relation to how improved flexibility will allow for employees to return to work in July, and new requirements for employers to start contributing to the scheme from August. We have added key dates for employers to this article to help you stay up to date.
The complexity of the scheme has left many employers confused on where they stand and what to do next. To clear things up, we’ve listed the essential points below.
- It’s designed to retain jobs.
- Valid for anyone on the PAYE payroll on or before 28 February 2020, or before 19 March 2020 provided the employer had submitted real time information payroll data by that date, which means anyone joining after that date doesn’t qualify and anyone working for you that does not work through your PAYE payroll will not qualify. However, they may be able to claim from their previous employer.
- For those employees who have been transferred to a new employer under TUPE after 28 February 2020, they will also be eligible for furlough. This is because the very nature of TUPE is to preserve the rights of the employee during their transfer from one employer to the other, so it could therefore be argued that they should be treated as any other PAYE employee in this instance.
- It’s a grant (not a loan) available to all employers with a UK bank account and UK payroll, for payment of 80% of your employee’s gross salary or £2,500, whichever is lowest. It will be calculated by looking at the highest of either the same month’s earning from the previous year or average monthly earnings for the 2019-2020 tax year, if the employee has worked for you for over a year. If the employee has been employed for less than 12 months, a claim for 80% of the employee’s average monthly earnings since the employee started work, can be made. If the employee only started in February 2020, a claim for 80% of the pro-rata earnings amount so far, can be made. Employer’s NI and pension contributions (3%) are paid on top.
- Some contractual compulsory commissions, bonuses and fees are also payable, as well as past overtime, but discretionary or non-contractual bonuses or commissions, tips or non-monetary benefits such as car or health benefits are not included. If you would like further guidance on what is or is not included, please contact our employment solicitors.
- Pay can be made under this scheme from the time an employee actually stops work and starts furlough leave, until they return to work again. You can top up this amount, but do not have to do so.
- If you have made anyone redundant since the outbreak, and before furlough was announced, you can reinstate them and then furlough them. You should ensure that there is a genuine case for re-employment so that there is not a risk that HMRC will later see this as fraudulent and not pay the grant in respect of that individual. It is also important to be aware of potential cash flow issues if the scheme does not start paying when it is intended to and minimising your business’ exposure in that regard. You should also consider whether further employment rights might be gained if an employee’s employment is extended by their re-employment and whether this may cause a future concern for the business.
- If a former employee approaches you asking if they can be re-employed and furloughed you should ensure that you do not provide a response which could be construed as discriminatory or related to any other unlawful detriment. If you are approached by a former employee you may wish to seek specific advice from our employment solicitors.
- It’s applicable to all employees, others working through PAYE and apprentices (for specific information on furlough leave for apprentices, contact our employment solicitors). Agency workers, even those working under their own umbrella company can be furloughed under this scheme. Executive directors qualify and like other employees they must not carry out work when furloughed, but they are justified in carrying out their statutory director’s duties (such as filing company documents). Certain non-executive directors may not be furloughed if they haven’t had an active role within the business.
- You can furlough an employee being ‘shielded’ or living with someone being shielded as per the government’s public health guidelines or you can furlough those with caring responsibilities (such as parents with young children).
- If someone is on maternity leave, adoption leave, paternity leave or shared parental leave, they continue to be paid statutory leave pay. If they have not yet gone on leave, you can furlough them now and then when they’re due to go on leave, move them to the terms of your cover. If your business offers enhanced contractual maternity, adoption, paternity or shared parental leave pay, you can claim under this scheme for that.
- Employees are allowed to find other work whilst furloughed in the same way that they’re allowed to work for and be furloughed by more than one employer. This will likely be covered in your employment contract but if not, you may want to set rules so they can’t work for a competitor, otherwise there is little to stop an employee receiving both 80% of their salary on being furloughed by your business and an additional 100% of their salary for working for another employer during that same working time.
- The government portal to claim went live on 20 April 2020 and can be accessed here: https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme
- Employees must be furloughed for a minimum of 3 weeks.
- It is unlikely that payments will be made before the end of April and even then, it may take a while, so be prepared to fund the gap or ask your employees to wait.
- When furloughed, workers remain your employees, but they can’t do any work for you and you can’t ask them to. In fact, to qualify for payment under the job retention scheme, employers and employees should have agreed in writing that an employee will not carry out work for their employer whilst furloughed.
- You’re allowed to speak to employees during the time they’re furloughed. We’d recommend regular contact to see how they’re doing.
- HMRC have clarified that employers can furlough the same person more than once, so long as the furlough leave is for a minimum of 3 weeks on each occasion. For example, an employee could be furloughed for three weeks, brought back to work and then furloughed again, which can allow for employees to be rotated on and off, giving employers more flexibility and the opportunity for different employees entitled to furlough leave an opportunity to be furloughed at some point during the scheme.
- If an employee wishes to leave your employment during furlough, you revert to the employee’s contractual notice period. The government will pay them the furloughed amount for their notice. If their notice period spans them being furloughed and coming back to work, they’ll be paid in part by government furlough and partly by you when they’re back in employment.
Key dates for employers
- The deadline for placing employees on furlough is 10 June 2020. After this, the CJRS will close to new applicants on 30 June 2020.
- From 1 July 'flexible furlough' will mean that employers can agree with employees the time split between working part time and being furloughed part time. This is a month earlier than previously announced by the government in order to get people back to work sooner.
- From 1 August there is a gradual reduction in the financial support offered to employers under the scheme. This means that 80% of an employee's salary can still be claimed under the furlough scheme up to a maximum of £2500, but employers will need to pay employer NICs and pension contributions and these cannot be claimed through the CJRS.
- From 1 September only 70% of employees’ salaries (up to a maximum of £2,187.50) will be reimbursed through the scheme. Employers must then continue to pay employer NICs and pension contributions and top up adding at least 10% to the employee salary payment so the employee receives at least 80% of their salary up to a cap of £2500, or more if this has been agreed between the employer and employee.
- From 1 October, the government will only reimburse 60% of an employee's salary (up to a maximum of £1,875), and employers will need to continue to pay employer NICs and pension contributions and top up the furloughed employee's salary to at least 80%.
- The furlough scheme will close completely on 31 October 2020.
Maintaining company culture
Furloughed workers are still allowed to be part of things that instil culture such as:
- Online training
- Social events
- Weekly team catch ups – as long as work isn’t discussed
If it’s not revenue generating activity or services for the business, they can be part of it
The four stages of changing employee terms (furlough or reducing hours/salary)
- Decision making – what to do, when and how.
- Notification – tell all staff what’s being proposed.
- Consultation – speak one to one with your employees, either yourself or through employee representatives (see below). A reduced consultation period should be permitted in these exceptional circumstances.
- Contractual variation – get a letter out to staff confirming the proposed change(s) in their contractual terms, they should then sign this to agree the change(s) and send it back to you. If they don’t agree, then you must negotiate or agree a different route. Staff can sign it, take a photo and email or instant message it back. If you’re reducing their benefits package, that all has to be covered in the Variation Contract.
- Employee representatives are necessary when it is proposed that 20 or more employees are going to be subject to variations in their contract, such as placed on furlough or asked to take a pay-cut. Note that there are financial penalties of up to three months’ wages for each impacted employee if collective consultation obligations are not complied with. If you are unsure of this process, speak with our employment solicitors.
- In larger teams, employee representatives are nominated by the whole team. Management then report to the employee representatives, who then communicate to the rest of the team.
- No set number of representatives are required, but have enough to spread the communication load e.g. a ratio of one to five.
- Make sure everyone is fairly represented and covered by an employee representative.
- This decision must be based on what’s right for the business. There is no rule on how much and who gets a pay cut.
- Don’t promise to pay back salary cuts because you’re burdening your business with debt, but you can offer to try.
- To many employees it won’t necessarily appear fair, so take the time to explain it’s about saving the business.
- Statutory Sick Pay (SSP) is payable from day one if the sickness is in respect of a COVID-19 related illness.
- If an employee has been asked to shield by the government as a result of being particularly vulnerable in respect of COVID-19 that individual can be paid SSP.
- If an employee is in self-isolation, you can still ask them to work because they’re not sick, however be considerate of their situation.
- It is an employee’s statutory right to ask for a ‘reasonable amount of time’ off to care for dependents – this is unpaid.
- If an employee is on sick leave and receiving SSP they cannot be furloughed, but they can be furloughed once they recover and are no longer on sick leave receiving SSP.
- If an employee does not qualify for SSP, they might instead qualify for Employment Support Allowance.
- Employees will accrue holiday whilst furloughed and it may be that more annual leave can be carried over to the next leave year than would usually be the case.
- To manage future capacity, consider the amount of holiday your employees will have when they come back and agree when this can be taken. Up to 4 weeks of their accrued holiday can be carried over in to the next 2 holiday years if necessary.
- Try to communicate as openly as possible with staff about their annual leave and when this should be taken so that the business will be adequately covered and employees are happy when the leave is to be taken.
- Annual leave can be taken during furlough leave as long as their employer has clarified that this is possible. The employee should receive full pay for any annual leave taken. Employers may wish to communicate with their employees that annual leave during furlough leave is not allowed provided that payment for annual leave will not be paid back by the government whereas remuneration for furlough leave will.
- Bank holidays are usually part of the 5.6 week’s minimum paid annual leave allowance for full time employees and so employees can request that a bank holiday be taken as paid leave and with the employer’s agreement the employee will receive full pay for that day. Equally, employers can require employees to take paid holiday on a bank holiday, provided that they give the employee notice of this and the employee is not on sick leave. If Coronavirus means that an employee cannot take bank holidays off as annual leave, this holiday should be taken later in the same holiday year and if this is not possible, those days can be added to the four weeks’ paid holiday that can be carried over and taken at any time over the next two holiday years.
Template letters to furlough employees or issue pay cuts
Our templates are no longer available - The 10 June 2020 was the last day on which someone who has never been furloughed before can start a period of furlough and qualify for their wages to be covered by the CJRS.
- Be very clear about why you’re making these decisions
- Explain you’re saving the business
- Be honest, transparent and keep regular communications open
- Before cutting salaries and/or placing staff on furlough – notify of proposal, consult about this and get written consent
- Be aware of likely delays in receiving furlough payments from government