With lots of employers furloughing employees under the coronavirus job protection scheme to try and ensure that the business survives the unprecedented challenges being caused by the Covid-19 pandemic; it raises lots of concerns from employees and employers alike as we try to navigate these challenging times.
We have compiled a list of answers to frequently asked questions that we’ve been helping clients with in relation to furloughed employees and the Job Retention Scheme. We hope sharing these FAQs are helpful.
When calculating the salary, do we include benefits and pensions (employers’ contributions) as well?
The government will reimburse 80% of a furloughed employees’ usual monthly wage up to £2,500, plus the associated employer national insurance contributions and minimum auto-enrolment employer pension contributions on that wage. The government said that they will issue more guidance on how employers should calculate their claims for NI and pension before the Job Retention Scheme goes live on their website. We are therefore expecting more guidance on this point shortly.
What is the tax position with furloughed staff? Is the £2500 after tax? Do you still pay tax?
The £2,500 is a gross figure and tax and NI will be accounted for in the usual way through PAYE. The business will then be reimbursed by HMRC and they can claim for the employer NICs and pension contributions in addition to the salary costs as set out above.
Does a member of staff need to have been in continuous employment for a set period of time to be entitled to this?
No, but they do need to have been on the payroll before 28 February 2020.
Can employees put in this furloughed scheme continue to receive 100% of the salary or only the 80%?
This is a matter for each employer. They are not obliged to top up the salary to reach 100% although technically speaking, to only pay 80% of an employee’s salary may be in breach of their contract of employment. However, the reality is that many businesses will not be able to top up the additional 20% if they are not producing income. Bear in mind that employer national insurance contributions and automatic enrolment employer contributions on the additional top up salary will also need to be met by the employer, as well as any voluntary pension contributions over and above the mandatory minimum (although the voluntary contributions can be withdrawn if the employees are prepared to agree this as part of their furlough).
The sensible thing to do is to consult with your staff and let them know if you are unable to top-up their salaries, you would then need to vary their contracts accordingly. In furloughing any employee, there will need to be changes made to their contract, so it is important this issue is clear. If consultation is not realistic in the timeframes involved then you may have to consider unilaterally varying employee contracts on this basis – whilst this is risky, in the present circumstances it is unlikely that it would be considered unreasonable and lead to Tribunal claims, although it is always best to do this with agreement.
We have an employee who may need to be furloughed who is aged over 70, does this make a difference under the government scheme?
No. Age makes no difference to eligibility for the Job Retention Scheme. You need to be very careful here that you do not make decisions based on the protected characteristic of age as you could be on the receiving end of a discrimination claim. The point you do need to bear in mind is if the employee is in self-isolation and cannot work, and is therefore claiming statutory sick pay – they will not be able to recover money from the government twice, so they would need to either be off-sick, or furloughed, not both at the same time. If they are shielding, then they can still be furloughed.
Does the job retention scheme include cover teachers that are on the books of agencies that are paid by the day?
This depends on the nature of their employment status. If they are employed by the agencies, and paid through payroll on PAYE, then they will be covered by this scheme if there is not enough work and they are furloughed by the agencies. The fact that they are paid by the day should not make a difference. (See below in relation to how pay is calculated when it varies).
Do staff who are following the government guidelines in relation to self-isolation come under the job retention scheme?
As set out above, you cannot claim statutory sick pay and be paid via the Job Retention Scheme as a furloughed employee at the same time. If an employee is unwell or self-isolating, then they should go onto sickness absence in the usual way and they would be paid statutory sick pay (and possibly contractual sick pay depending on their company policy). When they are well enough to return to work, they could then be furloughed if there is not enough work for them to return to or the business has had to close in the meantime.
In reality, if staff are already furloughed and then become unwell or are required to self-isolate, they may be reluctant to tell their employer because (subject to any contractual sickness absence pay) they may actually receive less income by moving onto SSP, although it seems unlikely that there would be a way to monitor this.
However, if employees are shielding in accordance with government advice, they can be placed on furlough.
Are there any provisions for people on hourly contracts?
Yes. If you work under a contract of employment, even on a zero-hours contract, you are eligible for the Job Retention Scheme if you have been furloughed as there is not enough work. If your earnings are variable then your earnings will be calculated based on the same month’s earnings from the previous year, or the average monthly earnings from the 2019-2020 tax year, whichever is higher. If you have not been employed for a full 12 months, then it can be calculated on an average of monthly earnings since you started work.
We are just about to furlough our on-site staff, we just want to make sure we do it such that it doesn’t prejudice any claim we may have under the CJRS.
Have a look at our guidance note on how to deal with furloughing staff in practice and the steps you will need to take. Read the guidance note here.
Can someone in the furlough scheme do work for other employers?
Possibly. It is possible to be furloughed from more than one job, therefore it would seem that you can continue to work for other employers (if you already do so) whilst you are furloughed from another job. For example, if you work three days a week for one company and two days a week for another but are only furloughed by one business, you can continue to work for the other.
Some people are trying to pick up extra work during this period to help make ends meet. However, it is not possible for you to work during the hours that you are employed for the business that has declared you as furloughed. We would suggest you check your contract of employment as this will often say whether you are allowed to work anywhere else whilst you are employed by that business. Also bear in mind that if you are furloughed, you are still an employee and remain subject to any restrictions or non-compete clauses in your contract. If there are no restrictions on you working elsewhere whilst under contract then you may find it is acceptable for you to obtain additional work during this period, providing it is not during your contracted hours. It may be sensible to seek permission from your employer in the interests of transparency.
An employee can take part in volunteering or training as long as it does not provide services to or generate income for or on behalf of their employer.
Can a managing director of a company furlough themselves (if they are paid a salary via PAYE)?
Yes, if they are a salaried employee through payroll then there is no reason why a director could not declare themselves as furloughed and utilise the Job Retention Scheme in the same way as their employees. However, in reality, company owners and directors are often self-employed for tax purposes and may be better to consider the options available for self-employed people as this allows you to continue working (unlike furloughed staff).