Furlough guidance current as at 20th April 2020
Coronavirus Job Retention Scheme (furlough leave)
On Friday 20th March 2020, in response to the Covid-19 Coronavirus outbreak, the Chancellor Rishi Sunak announced support for employers whose businesses have been affected by the virus. All businesses, regardless of sector, are eligible for the Coronavirus Job Retention Scheme. The scheme permits employers to pose to their employees an option of Furloughing as an alternative to lay off or redundancy. In doing so, the employee may then receive pay at 80% of their normal earnings (up to a max of £2500 per month), which under the scheme, the employer will then be able to claim back via HMRC.
Is there eligibility criteria for Furlough?
It covers all employees on the PAYE system, including zero-hours workers and therefore will cover many workers and not just employees.
Self-employed are not covered by the scheme, but help is now available from the Government for the self employed.
An employee or worker must have been on your PAYE payroll on or before 19 March 2020.
The scheme also covers employees who have been made redundant or stopped working for you on or after 28 February 2020 and you re-employ them. It even covers employees you did not re-employ until after 19 March 2020.
If employees transfer under TUPE, the new employer is eligible to claim under the scheme in respect of the employees of a pervious business transferred after 19 March 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership.
An employee on sick leave or self-isolating should receive Statutory Sick Pay, but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed. However, 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.
Employees who are unable to work because they have caring responsibilities resulting from Coronavirus can be furloughed. For example, employees that need to look after children can be furloughed.
How do I invoke Furlough?
When considering furloughing employees, you must first consult with them to gain their agreement in writing that they are willing to receive 80% of their wage. If an employee expresses an unwillingness you could make them aware that the alternatives are statutory guarantee payments (if there is a lay-off clause within their employment contract) or redundancy in there is no work long term.
If you are furloughing over 20 employees, you may want to consider collectively consulting with them.
You must notify employees of their Furlough status in writing and keep a record of this for five years.
Can I give employees work when they have been furloughed?
Government guidance to employees is “to qualify for this scheme, you should not undertake work for [employers name] while you are furloughed”. Therefore, it is advised that no work is requested of the employee otherwise you may not claim the refund of 80% as per the scheme.
Formal meetings such as consultation for redundancy, disciplinary hearings and grievances hearings can still take place during the furlough period.
Can employees work elsewhere when they have been furloughed?
Employees can start a second job whilst on Furlough if allowed under their employment contract. Any term that restricts further employment during normal working hours can be waived by the employer.
An employee will be paid 80% of their wage/salary from their current employer and 100% of their wage/salary from second employer.
An employee can be prevented from working for a competitor, subject to enforcement of a clause being included within the employment contract. For clients with Elcons contracts, this clause is located in the Statement of Main terms of Employment entitled “OTHER EMPLOYMENT”.
Do employers need to notify their employees that they can obtain a second job whilst under Furlough?
It is not the employers responsibility to make employees aware of this.
What about other contractual/statutory leave during a period of Furlough?
If an employee becomes sick while furloughed, the employee retains their statutory rights, including their right to Statutory Sick Pay. This means that furloughed employees who become ill must be paid at least Statutory Sick Pay. It is up to employers to decide whether to move these employees onto Statutory Sick Pay or to keep them on furlough, at their furloughed rate. If the employee is moved onto Statutory Sick Pay, employers can no longer claim for the furloughed salary.
Maternity leave will override a period of furlough.
Employees can, subject to normal authroisation rules with the employer, take annual leave during a period of Furlough but holiday pay must be paid at 100%. Employers can recover the holiday pay back, but only up to 80% (the same as if they were under Furlough).
What is the employee’s status whilst furloughed?
They remain an employee and length of service will continue to accrue. Contractual rights will remain save for pay and benefits.
Can I put staff on furlough, bring them off furlough and then put them back on it?
Yes, but for a minimum period of three weeks each time. See note below.
Pay – how will this work?
Your pay run will operate on its normal dates. You should pay at 80% of the normal wage. There is no clear guidance on this as of yet. We advise at present to pay based on contracted hours for those with set hours.
Pay for an employee whose pay varies is calculated in the following way:
If the employee has been employed for a full twelve months prior to the claim, you can claim for the higher of either:
- The same month’s earning from the previous year
- 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.
Earnings include any contractual commission an employee may earn and overtime. The 80% does not include non-monetary benefits such as health insurance or a company and discretionary bonus (including tips).
We advise taking guidance from HMRC and an accountant on this point.
You can choose to top up wages to any higher percentage, but this would be a business choice and you would not be able to claim more than 80% back via HMRC.
Is the contribution of 80% of £2,500 or is the total £2,500 per employee?
Guidance states “HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month”.
It is assumed that all cost paid through PAYE are included in this and we interpret the guidance to mean a maximum limit of £2,500 per employee per month. The intention also appears to be that the employee will receive £2,500 gross.
How do we claim back money?
Companies will be required to submit information to HMRC for staff furloughed with details of their earnings. HRMC have released a new online portal and this has gone live on 20 April 2020. The first claims are expected to be paid by 30 April 2020.
An employee must be furloughed for a three week block for you to be eligible to claim under this scheme. This is consistent with the public health guidance seeking to minimise the number of people outside of their homes on a regular basis.
To claim, you will need:
- Your ePAYE reference number
- Number of employees being furloughed
- The claim period
- Amount claimed
- Your bank account number and sort code
- Your contact name
- Your phone number
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.
You can only submit one claim at least every three weeks.
How long will the scheme run for?
Initially, the scheme has been put in place for three months and is backdated to the 01 March 2020 until 31 May 2020. The Government has stated that “this will be extended if required”. This has now been extended until the end of June 2020.
How do I ask am employee to return to work?
You can request an employee to return to work at any time and this will end the furlough period. We advise that any conversations asserting your request are followed up in writing and that as much notice as possible is given to an employee regarding a request to return to work.