Following its announcement last week, the government has now published further details of the Coronavirus Job Retention Scheme, commonly being referred to as the Furlough Scheme.
At the moment it is not clear whether actual legislation will follow, or whether HMRC will rely on this guidance. The link to the full guidance is here [ ], and we would strongly recommend that you review it in detail. The scheme is expected to be up and running by the end of April, with further guidance regarding the mechanics of claiming payment to be issued in due course.
The key points of the Coronavirus Job Retention Scheme (some of which had not previously been announced) are as follows:
- The scheme is open to all UK employers with a PAYE scheme in place on 28 February 2020.
- Any organisation with employees may apply (including charities, recruitment agencies and public authorities). The guidance does, however, make it clear that public sector employers are not expected to use it if (and as long as) central government continues funding wage costs in the normal way. The scheme also applies to agency workers who are not working.
- Employers can only claim once every three weeks. Claims can be backdated to 1 March 2020, provided the eligibility criteria are met.
- Employers can reclaim up to 80% of wage costs, capped £2,500 per month, plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions on those wages. Other payments such as commissions and bonuses are excluded.
- Employers can elect to top wages to 100%, but this is optional (although subject to employment law and varying any contractual entitlements).
- Where an employee’s pay varies, the employer is able to claim for the higher of (a) the same month's earning from the previous year (e.g. earnings from March 2019); or (b) average monthly earnings in the 2019-20 tax year.
- Concerns regarding what might happen if employees’ wages drop below the national minimum wage as a result of being furloughed have been addressed, with confirmation that employees are only entitled to the NMW for hours actually worked. Furloughed employees will not, of course, be working. Employees will, however, be entitled to the NMW for time spent training.
- Only employees on the payroll as at 28 February 2020 can be furloughed under the scheme. However, if an employee was on the payroll as at 28 February 2020 but was subsequently made redundant, they can be re-hired and furloughed under the scheme.
- It is crucial that the employee does not work for their employer at all during furlough leave. However, employees are able to undertake training and do volunteer work, the proviso being that they don’t provide services to or make any money for their employer.
- Flexi-furloughing will be possible, although furlough leave must be taken in blocks of a minimum of three weeks. This will enable employers to rotate employees on furlough leave, or to bring employees off furlough leave earlier than anticipated.
- Unless the contract provides for it (and even then employees need to bear in mind the duty to maintain trust and confidence in exercising contractual rights) normal employment law will apply, as this is a variation to the contract both in terms of status and (if paid at 80%) pay.
- When selecting who will be placed onto furlough leave employers must be careful not to unlawfully discriminate e.g. on grounds of disability or sex.
- Employees who are shielding can be placed on furlough. Employees who are currently on sick leave may be placed on furlough leave when their sick leave ends.
- Employees on maternity or other comparable leave will continue to receive maternity pay in the usual way. Women on maternity leave can elect to bring their leave to an end early, and be furloughed at that point (which has obvious pay benefits).