Another week in to the Covid-19 crisis and another iteration of the Government’s guidance about its revolutionary new Coronavirus Job Retention Scheme (the Scheme) has been released.
Each update seeks to clarify but still leaves unanswered questions each time. After sustained criticism from some quarters about the fact that the Scheme did not protect those who had started new jobs in March, the Scheme has now been further revised.
Here we summarise the answers to the key Who, How, What questions about the Scheme.
Which employers can claim under the Scheme?
Any employer who had a PAYE payroll scheme in place before 19 March 2020 (note this is a change from the previous 28 February), who has enrolled for PAYE online (or who does so now) and who has a UK bank account can claim under the Scheme where their operations have been severely affected by Covid-19. The Government has expressly recognised that different businesses will face different impacts from Covid-19 so use of the Scheme is no longer being tied to a need to avoid redundancies, however some employers have suffered considerable reputational damage for claiming on the Scheme. Several of our Registered Provider clients were initially concerned about the expectation that employers in receipt of “public funding for staff costs” ought not to claim on the Scheme and what that phrase was supposed to mean. Our view (supported by other sources) is that receipt of Housing Benefit and/or grant for development does not amount to public funding for staff costs.
What can be claimed?
Employers can claim 80% of salary (up to £2,500 per month) plus the employer NICs and statutory minimum employer pension contribution on that amount. There are particular rules about what earnings can be taken into account depending on whether the employee has a fixed salary or variable pay and from what point in time the relevant salary figure should be drawn from. Note that the change in the cut-off date from 28 February to 19 March (see below) has a consequential impact on the relevant salary figure to use for the claim in some cases. Regular payments that an employer is obliged to pay can be included in the claim (for example overtime and compulsory commission) but discretionary bonus and commission payments cannot be taken into account nor the value of benefits in kind or benefits provided through salary sacrifice.
Each period of furlough must be for a minimum duration of 3 weeks.
Employers don’t have to top up pay to 100% but if an employer wants to reduce pay then it will need to vary the contract of employment to do so. There is now a specific statement that pay to furloughed employees cannot be less than what is being claimed for them through the Scheme.
Many employers pay an employer pension contribution in excess of the statutory minimum but will not be able to reduce that during the furlough period. Benefits should continue to be provided during the furlough period, unless removed as part of a variation process.
Where an employee is returning from statutory family leave but then being furloughed, the claim and their pay during furlough should be calculated on what their salary should have been if not absent on family leave, not what it was whilst on leave.
Who can be claimed for?
The major change in the newest version of the guidance is that employees who were on the PAYE payroll on or before 19 March 2020 and notified to HMRC on a RTI submission on or before 19 March 2020 can now be furloughed. This is a response to the criticism that many brand new employees could not benefit from the Scheme.
An employer can furlough anyone who was on their PAYE payroll and notified to HMRC on a RTI submission on or before 19 March 2020 including employees, workers (including zero hour workers), officers, company directors and apprentices. Ex-employees who left on or after 28 February 2020 for whatever reason can also be re-employed and furloughed but there are some specific points that employers should consider before offering to re-employ someone.
Individuals who are in the Shielded group (or who need to stay at home with someone who is shielding) can be furloughed – and there is no longer a requirement that this is only where they would otherwise be made redundant – as can those who are unable to work because of caring responsibilities due to Covid-19.
Employers can now also furlough employees who are on sick leave (note that this is a change from the previous position) but shouldn’t do so because they are suffering from a short-term illness or self-isolating. However if the employer wants to furlough for business reasons and a member of the earmarked group happens to be on sick leave then they can be furloughed, at which point they become furloughed rather than sick and entitled to furlough pay rather than sick pay. This principle then follows through to what had been a grey area as to what would happen where an employee on furlough became sick. The guidance now makes clear that the employer can choose whether to keep the employee on furlough or pay them sick pay. An employer can’t claim on the Scheme to recover SSP so it would seem that most employers will choose to leave employees on furlough leave, although care should be taken as to the application of any occupational sick pay terms where an employer has reduced pay during furlough. Employers may want to think about changing occupational sick pay terms during furlough so that employees can’t assert a claim to 100% sick pay and to override any terms that would otherwise say they are entitled to SSP only if incapacitated.
Those in the vulnerable groups are not mentioned in the Guidance at all but we don’t take their omission to mean that they cannot be furloughed.
The position for employees TUPE’ing to a new employer has been clarified: if there was/is a TUPE transfer after 19 March 2020 and either the TUPE or PAYE business succession rules apply then the new employer can furlough the transferred employees and claim under the Scheme.
The Government has also confirmed that foreign nationals are eligible and employers can furlough employees on all categories of visa.
How is a claim to be submitted?
The new portal is due to be open by 20 April 2020. In addition to the list provided under the previous Guidance, employers will need to provide HMRC with National Insurance Numbers and names for the furloughed employees, and the employer’s Unique Taxpayer Reference or Company Registration Number in order to claim under the Scheme. Agents (but not file agents) are authorised to act for an employer for PAYE purposes.
Written evidence of employee having agreed to be furloughed needs to be retained for 5 years. Records and calculations in respect of the amounts claimed must also be retained.
What can an employee do whilst on furlough?
The big surprise has been that they can work for someone else, as long as not for an organisation which is linked or associated with their employer and provided it is permitted under their contract of employment. There is no meaning given to the phrase “linked or associated” organisation, but it would be reasonable to assume that it at least means other entities in the same group as the employer.
Employees should be encouraged to undertake training as long as that does not amount to providing services to or generating revenue for their employer or any linked/associated organisation.
An employee can also volunteer during furlough.
What is still unknown?
The most common question that we have had from clients for which there is still no official guidance is about the interaction of annual leave and furlough leave. However since we have just had two bank holidays (commonly days upon which an employer requires an employee to use their annual leave), now would have been the time for the Government to tell employers if its view was that annual leave and furlough leave could not overlap.
Comment
All employers should be aware that there are many legal issues which are created by the Scheme and these will need to be worked through by each organisation depending on its own circumstances and what it wants to achieve from the Scheme. These include how to successfully implement a lawful contractual variation and how you decide who should be furloughed.
As ever, the Devonshires Employment team is able to advise on the options available to clients under this Scheme and how to go about introducing it into your organisation. If you’d like any information or advice on how the above may affect you, then please contact a member of our Employment, Human Resources & Pensions Team or call 0207 880 4263.
