In unprecedented times, a key focus for government has been to ensure that the economy is in a fit state to recover once the current global health crisis is over. In order to do so, a priority is keeping people in their jobs. With supply problems, forced closures and significantly less customer activity in many sectors, employers may not have sufficient cashflow to keep paying salaries where income has been slashed. Therefore, a package of measures were announced in March and the most talked about measure has been now been extended.
We have set out the key points below but it will be important to consider the employment law implications of the provisions. Therefore we do recommend liaising with your legal advisors as well as your accountants before taking action.
This measure, managed by HMRC, provides for grant payments of 80% of the employment costs of certain employees designated as ‘furloughed workers’, capped at £2,500 per month, up until 31 July 2020. From 1 July 2020, furloughed individuals can return to work on a part-time basis.
On 29 May 2020, the Chancellor announced further important changes to the furlough scheme which affect which employees you can furlough and the amount of their wages that you can claim.
Key points to note include:
Full details can be found in our insight Changes to the furlough scheme announced.
It is aimed at employees of any employer with a UK bank account, enrolled for PAYE online and who had created and started a PAYE payroll scheme on or before 19 March 2020.
This includes most organisations with employees in the UK, as well as individuals who operate PAYE for their staff, such as nannies.
Payments will be made in respect of employees who are designated as ‘furloughed workers’, i.e. broadly they would have otherwise been available to work but the employer cannot provide any work for them, and have been kept on rather than made redundant.
Claims can only be made for employees furloughed under the scheme by 10 June 2020, effectively closing it to new entrants from 30 June 2020.
The scheme is only available to those employees who were added to payroll and included in an RTI submission to HMRC on or before 19 March 2020. by the employer making the claim and who were first furloughed by 10 June 2020.
This will include those on zero hours or flexible contracts and agency workers paid through PAYE.
If you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages from the date on which you furloughed them, even if you do not re-employ them until after 19 March 2020. This applies only if they were on your payroll as at 28 February 2020.
The scheme does not stop a company from making individuals redundant while on furlough or immediately after, at which point grant payments cease. There is no requirement to bring the employee back to work after the period of furlough. Normal redundancy procedures and consultations are required.
Employees are eligible for the scheme if they are shielding in line with public health guidance (or need to stay home with someone who is shielding), if they are unable to work from home and the employer would otherwise have to make them redundant.
Similarly, employees who are unable to work because they have caring responsibilities resulting from COVID-19 can be furloughed, for example, employees that need to look after children and cannot work from home.
The guidance makes it clear that workers paid through PAYE but not necessarily employees for employment law purposes are eligible for the purposes of the scheme. These include:
Employers can furlough an employee, restart their work and then restart furlough at a later date, provided that each period of furlough lasts at least three consecutive weeks.
A key point of the rules up until 30 June 2020, is that furloughed workers must not be doing any work during this period, simply reducing hours for some will not result in their being treated as furloughed. However, furloughed workers can undertake volunteer work or training, provided that this does not involve the manufacture or creation of an item or part thereof that can yield revenue for the company, or the provisions of services to the employer.
Firms can require workers to undertake training from home provided it meets the above. However they must be paid at least the National Living Wage/National Minimum Wage for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
Directors who are furloughed may undertake their statutory responsibilities, such as filing accounts, but must not undertake any activities which would produce revenue for their business.
The workers must remain furloughed for at least three weeks for the scheme to apply. Employees can be furloughed multiple times, but each separate instance must be for a minimum period of three consecutive weeks.
Employees placed on unpaid leave before 28 February 2020 cannot be furloughed.
Employees on sick leave or self-isolating can get Statutory Sick Pay or employers can opt for them to be furloughed instead. Where employees are on maternity leave, or receiving contractual adoption pay, paternity pay or shared parental pay the interaction of the rules with furlough can be complex and should be considered on a case by case basis.
From 1 July 2020, the rules will be changed to allow claims to be made while employees are transitioning back to work. Employers will be required to fund their employment costs for the time they are working but will be able to make claims in respect of a portion of their wages relating to non-working time. Full details can be found in our insight Changes to the furlough scheme announced.
Until 30 June 2020, the amount of the grant for a furloughed worker is 80% of that individual’s usual monthly wage costs, up to £2,500 a month, plus the associated Employers National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
From 1 July 2020 the scheme will change. Full details can be found in our insight Changes to the furlough scheme announced.
The apprenticeship levy should continue to be paid as usual, but the grant does not cover this.
The usual monthly wage is determined as follows:
The grant will cover 80% of the employee’s usual monthly wage, up to £2,500 per month. This changes from 1 July 2020 full details can be found in our insight Changes to the furlough scheme announced.
Payments can be backdated to 1 March 2020. However all claims for periods up to 30 June must be made by 31 July 2020.
Usual monthly wage costs can include any regular payments the employer is obliged to pay the employees. This includes wages, non-discretionary overtime, non-discretionary fees and non-discretionary commission payments. It excludes payments made at the discretion of the employer or a client - where the employer or client was under no contractual obligation to pay, including tips, discretionary bonuses and discretionary commission payments. Non-cash payments and non-monetary benefits (including salary sacrifice schemes) should be excluded.
There will not be a requirement for employers to fund the remaining 20% or more to top up to usual basic pay, though they can top up payments if they wish.
However, Working Time Regulations require holiday pay to be paid at the employee’s normal rate of pay or, where the rate of pay varies, calculated on the basis of the average pay received by the employee in the previous 52 working weeks. Therefore, if a furloughed employee takes holiday, the employer should pay their usual holiday pay in accordance with the Working Time Regulations and would have to fund this from the business. If an employee usually works bank holidays then the employer can agree that this is included in the grant payment. If the employee usually takes the bank holiday as leave then the employer would either have to top up their usual holiday pay, or give the employee a day of holiday in lieu.
Please note that from 1 July employers will be expected to fund the portion of a furloughed individual’s time spent working for their business.
Employees will retain their employment rights and continue to accrue holiday entitlement, as well as pension contributions etc.
Employers will then need to submit information to HMRC about the employees that have been furloughed and their earnings through the new online portal.
The information required will include:
In order to access the funds, you will need to:
Employers should discuss the employment law impact including contractual issues with their legal advisors when placing employees on furlough leave.
We would be very happy to partner with your employment lawyers to help collate the information you will need to make the job retention scheme claims and agree the change of status with employees. We can assist you with all stages of the claim process, summarised into four key areas:
Please speak to your usual Crowe contact if you require any assistance.