Coronavirus Job Retention Scheme
There is a huge amount of uncertainty for employers at the moment and with the government still writing up new legislation a lot is still unclear. We are working with the information we have available and have put together a guide.
Suddenly we are hearing the word ‘furlough’ being frequently used with employers unsure how to deal with this, we have put together an employer guide which might change once legislation is updated.
There has been no announcement that the minimum wage rates will not increase from next month so we have to assume this is going ahead as planned, the only postponement we are aware of is IR35.
As an employer you have a few options:
Make staff redundant (but there may be no cash to pay statutory)
Agree with employees to reduce staff hours - pro-rata accordingly
If they can work from home this should be the route forward
Furlough - they cannot do ANY work during this period.
Under the new Coronavirus Job Retention scheme, government grants will cover 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months, and can include workers who were in employment on 28 February.
To claim under the scheme employers will need to:
designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation so please take HR advice
submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. A business that needs short term cash flow support, may benefit from the VAT deferral announced and may also be eligible to apply for a Coronavirus Business Interruption Loan
Some technicalities of Furlough
✅We cannot backdate if they have been working.
✅The mechanism for getting the money back from the government won’t be in place until at least May (we think) because there is nothing in existence already. If we processed furlough in April, but didn’t have the cash to pay, the business may have no choice but to wait until received. So whilst we would process payroll, the employee may have to wait for their salary.
✅The cap per person is £2,500 including NI/Pension etc - some details still need to be clarified on this though. We are still not clear if it is 80% of the net or 80% of the gross netted down.
✅Pension contributions will still need to be paid.
✅It’s unclear as to if we put them on Furlough but then take them off, whether we’d be able to put them on again.
✅If someone isn’t working for another reason e.g. childcare, then we can’t Furlough. They would be on unpaid leave.
✅It generally won’t be available to standard sole-directors/partnerships - but if any of the directors cannot work - not even on admin, then they could be put on Furlough.
✅You have to have a fair process e.g. can’t send your friend home on 80% of the pay, but keep someone else doing a full job for just 20% more without a process.
✅There may be a provision in an employment contract already about terminating employment, but if not then the employee can agree to it via a letter. It’s generally thought it will be more attractive to the employee to agree.
✅The employee will still accrue holidays etc.
✅Upon return, if you were to then make them redundant, they’d be entitled to normal statutory (or whatever their contract says).
✅No obligation to pay the 20% shortfall.
✅Employment tribunals (if an employee feels they have been treated unfairly) won’t be held for at least 6-12 months.
Q: What the does “furloughed” mean?
A: It allows someone to be absent from work for a period.
Q: Are the government going to pay my team for me?
A: There seems to be a common misconception that the government will subsidise 80% of your team costs while they work for you. Not so – it’s only for people whom you would normally make redundant in any other situation. They are in effect on “garden leave”, and should not be doing any work during the “furloughed” period.
Q: Surely they can do some odd jobs for me whilst off…
A: Absolutely not.
Q: Can they go part time and benefit from this?
A: No. They can’t lift a finger. You’d be best making some of your staff full time, and put others on garden leave.
Q: Who qualifies?
A: Anyone on the payroll on 29th February.
Q.I have agreed on a contract for an employee to start on 1 April 2020
A. The announcement from the government says it can include employees who are employed on 28th February 2020. There has been no announcement that it will only include employees at that date we will need to wait until legislation is released.
Q: How do you work out what they get 80% of?
A: No definitive answer as yet – I’m thinking it’ll work like other things, so an average of last 12 weeks pay.
Q: Can we alter February’s payroll to bump the figure up?
A: No, RTI has already been submitted and staff paid through the bank which will be checked.
Q: Can directors benefit from this?
A: No guidance yet – I suspect shareholders will be excluded, A director can be furloughed subject to the legislation saying different but a director has director responsibilities which are part and parcel of their employment.
Q. I'm a director of a limited company and want to treat my dividends as self employed income?
A: No, this would not be allowable.
Q I have an employee on sick leave who has an agreed date of return can I furlough them earlier?
A. If an employee is off sick they don’t qualify for furlough as this is the effective reason they are not at work but once they return to work they will become eligible.
Q If 80% of the salary is below the minimum wage do I still need to be paid the minimum wage rate?
A: Yes, they must be paid minimum wage at least.
Q.We are paying staff to the end of March and have money to do this but from 1st April we plan to furlough but I'm not going to have the money to pay my staff at the end of April?
A. If it is a small amount many banks and lending institutes are lending but if this for a large amount say £50k you may struggle to get this in a loan. If this is the case you need to agree with the employees to defer their wages until the government has time to pay this to you. Employees who want to go down the route of suing their employer could do so but as all the courts have now closed it would be a pointless exercise, you would have had the money from the government before it got to court.
Q It is no longer my responsibility to pay my employees, the government is now responsible?
A: The employers are responsible for the wages not the government, as an employer you are responsible to claim the 80% subsidy.
Q. I have staff on zero hour contracts -
A: They are workers, not employees, we still don't know a clear answer, we assume this may be based on a 12 weeks average.
Q. I have staff on basic basic pay plus commission can I still include the commission on the scheme?
A: Currently the government has not specified if it is limited to basic salary, we need further guidance on this.
Q. Can you move an employee from workplace to work place not affected by COVID-19?
A. If they have a mobility clause in their employment contract yes.
Q. Are agency workers entitled to be furlough
A: No, they are not your employee, they would be employees of the agency or deemed self employed.
Q. Can I ask an employee to go on maternity leave early?
A: No, it's the employee's decision when they take maternity leave.
Q If I'm on furlough and I have my baby early how will I be paid?
Q. Your SMP will kick in from the day the baby is born.
Q. Do you have to guarantee work when you send employees on furlough
Q. Until further guidance is released we think that you wouldn't.
SAMPLE LETTER FOR EMPLOYEES
AGREEMENT FOR FURLOUGH LEAVE
Employee Name: XXXX
This is a variation to your contract of employment, designed to implement and take advantage of the government’s Coronavirus Job Retention Scheme.
We agree that from [DATE] you shall be on Furlough Leave. This means your contract of employment continues, but you shall not be required to come into work. We will pay you [80%] / [80% subject to a maximum liability for us of £2,500 per month, including employer’s national insurance contributions and employer’s pension contributions] [100%] of your salary during that time.
Your Furlough Leave shall end on the earliest of the following events:-
(a) the government’s Coronavirus Job Retention Scheme ending
(b) either you or us ceasing to be eligible for funding under that scheme; or,
(c) us deciding to cancel Furlough Leave and bring you back to work.
2. During your Furlough Leave, you may not work for any other organisation, or on your own account. If you do, you must tell us, and you may be liable to repay any sums we have paid you under this scheme if we become liable to repay it to the Government.
3. When your Furlough Leave ends, while we will always endeavour to provide you with work, in the event of insufficient work being available you agree we are entitled to place you on short time or lay you off without any pay except for statutory guarantee payments.
Signed: _________________ Date ___________
Signed: _________________ Date ___________