InsightsInsight - Coronavirus, Employment & HR - UPDATED: June 26, 2020 10:00 am
Coronavirus Job Retention Scheme: Furlough leave
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This article summarises the current (as at 25 June 2020) guidance on furlough leave and what this means for business owners and employers, as well as employees.
Further reference should also be made to the Government guidance on whether you can claim (for employers) and guidance on whether you could be covered by the scheme (for employees).
What are furloughed workers?
Furloughed workers are those individuals where it has been agreed they will go onto furlough leave and who are designated under the Government’s Coronavirus Job Retention Scheme (CJRS).
Individuals can be furloughed where an organisation is unable to maintain its current workforce because operations have been severely affected by coronavirus. The CJRS scheme will be closed to new entrants from 30 June 2020.
From that date, employers are only able to furlough employees that they have previously furloughed for a full three-week period prior to 30 June 2020 save for those returning from statutory family leave, so long as the employer has used the scheme for other staff.
Extension of the furlough leave scheme
The CJRS was initially put in place for a four-month period from 1 March 2020, but this has since been extended to the end of October 2020. The scheme will continue in its current form until the end of July, except that from 1 July, employers can bring employees back to work part-time and claim the CJRS grant for their normal hours not worked.
Between August and October 2020, the CJRS will be tapered and employers will be asked to share the costs of the scheme with the Government, but the overall financial limits of the scheme will remain (80% of salary costs per employee capped at £2,500 per month).
The tapering of the scheme will operate as follows:
- June and July – employers are not required to contribute to the costs of the furlough scheme.
- August – the Government will pay 80% of wages up to a cap of £2,500 and employers will pay employers’ NI contributions and pension contributions.
- September – the Government will pay 70% of wages up to a cap of £2,187.50 and employers will pay employers’ NI contributions, pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
- October – the Government will pay 60% of wages up to a cap of £1,875 and employers will pay employers’ NI contributions, pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
Key information for employers
The practical furlough leave scheme arrangements were put in place on 20 April and coverage could be backdated to 1 March 2020. Until the cut-off date of 30 June 2020, it was open to all UK employers (special provisions apply to employers in the public sector and those who receive a substantial proportion of their funding from the public sector) where an individual was on an employer’s PAYE payroll before (or on) 19 March 2020 and where there was an HMRC RTI submission for that individual on or before 19 March 2020. Going forward, employers are only able to furlough employees that they have previously furloughed for a full three-week period prior to 30 June 2020 save for any returning from statutory family leave providing the employer has used the scheme for other staff.
Under the terms of the current scheme structure, employers can use the HMRC portal to claim for 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated employer National Insurance contributions and minimum auto enrolment employer pension contributions from the point at which individuals stopped work. Tax and employee’s NI are payable on furlough payments.
Organisations can include in claims, regular payments they are obliged to pay. This can include wages, past overtime, fees and compulsory commission payments. Reference should be made to the guidance.
Businesses do not need to place all employees on furlough leave. However, to be eligible for the subsidy, when on furlough and up to the end of June, employees cannot undertake work for or on behalf of the employer, meaning they cannot provide services to or generate revenue for, or on behalf of, the organisation. Between July and October 2020, individuals will be able to do some work part time, whilst on furlough for the remainder of their normal working time as detailed above.
All claims for the period before 30 June 2020 must be made by 31 July 2020.
Who does the furlough leave scheme apply to?
Employees/workers who are eligible for the furlough leave scheme must have been on the company’s PAYE payroll on 19 March 2020 (and as above an RTI submission made on or before this date), and can be on any type of contract, including:
- agency contracts
- flexible or zero-hour contracts
- fixed term employees (it is possible to extend or renew fixed term contracts)
- some workers (providing they are paid through PAYE). Detailed guidance is provided via the CJRS web page
- employees who TUPEd after 19 March 2020.
The scheme can cover those made redundant since 28 February 2020, if they are rehired (although an employer is not obliged to rehire).
The Government has provided further information on how to find out which employees you can put on furlough and claim for through the scheme.
In order to be eligible an organisation must have:
- created and started a PAYE payroll scheme on or before 19 March 2020
- enrolled for PAYE online (this can take up to 10 days)
- a UK bank account.
There is a minimum period of furlough leave of three weeks and “employees can be furloughed multiple times, but each separate instance must be for a minimum period of three consecutive weeks.”
Employees must now also have been previously furloughed for a full three-week period prior to 30 June 2020.
Before 30 June 2020 individuals on furlough leave could not undertake work for their organisation, or a related organisation, during furlough. From 1 July 2020 it is possible for furloughed employees to return to work on a part-time basis and for their employer to claim under the furlough scheme in respect of the normal hours that they are not working.
The maximum three-week furlough period that applied until 30 June 2020 ceased to apply on 1 July 2020 and there will be no minimum furlough period although employers should make a maximum of one claim per week. Individuals can be flexibly furloughed more than once therefore allowing employers to continuously rotate furloughed staff.
The updated guidance contains worked examples of how pay should be calculated. Calculations vary based on whether an individual has been previously treated as receiving fixed or variable pay.
The first step is to calculate the proportion of their normal time that the individual is working and the proportion for which they are furloughed. Staff are paid in full for the hours they work and the employer will be responsible for meeting these costs. The employer can then claim for the proportion of time the individual is furloughed under the new scheme with the same cap for the time not worked continuing to apply until 1 August when the Government’s level of contribution will begin to decrease.
Additional record-keeping requirements mean that employers must retain records of the usual hours worked by individual employees (including the calculation used to establish usual hours) and the actual hours worked for six years.
Full furlough also remains in place until 31 October 2020.
Putting individuals on furlough leave
The position remains that employment law requirements still apply. Implementation for most employers who want to pay less than 100% pay is therefore:
- by agreement
- utilising existing contractual lay off clauses – although some commentators (including the CIPD) have suggested agreement should still be obtained and confirmed in writing.
- by imposition – most employers will need to follow a formal contract change process and collective consultation rules apply where 20 or more individuals are involved.
- placing an employee on furlough leave has to be confirmed in writing (although it has now been clarified that it is not necessary to have a written response from employees, confirming agreement). Documentation has to be kept for a minimum of five years.
How to claim
If an employer implements furlough leave, clear written confirmation needs to be sent to employees and a record of this communication must be kept.
If you are an employer looking to claim, you will need:
- your employer PAYE reference number
- the number of employees being furloughed
- National Insurance numbers for the employees you want to furlough
- names of the employees you want to furlough
- payroll/works number for the employees you want to furlough
- your Self Assessment Unique Taxpayer Reference, Corporation Tax Unique Taxpayer Reference or Company Registration Number
- the claim period (start and end date)
- the amount claimed (per the minimum length of furloughing of three consecutive weeks)
- your bank account number and sort code
- a contact name
- a phone number.
Businesses will need to calculate the amount being claimed and HMRC will retain the right to retrospectively audit and there are different requirements depending on whether a claim is made for more, or fewer than, 100 individuals.
Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they receive written communication to confirm their furloughed status.
Further information on claiming
You can only submit one claim, at least every three weeks and claims can be backdated until the 1 March 2020 if applicable. All claims pre-dating 30 June 2020 must be processed by 31 July 2020.
Once HMRC have received an employer’s claim and where it is accepted an employer is eligible, HMRC will pay the grant via BACS payment to a UK bank account. HMRC intends to make payments within six working days of claims being received.
As above, employees must receive confirmation in writing of their status as furlough workers and this has to be kept by the organisation for five years.
The 17 April 2020 guidance (updated on 14 May 2020) indicates:
“Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years.” (our emphasis).
Sickness and furlough leave
If employees are on sick leave or self-isolating as a result of coronavirus, they may be entitled to Statutory Sick Pay (SSP) subject to eligibility conditions applying. Individuals who are sick can be placed on furlough but they will then cease to receive sick pay and will receive furlough pay instead.
Employers are, however, entitled to furlough employees who are being shielded or off on long-term sick leave and it is for employers to decide whether to furlough these employees. It is possible to claim furlough payments from the CJRS and payments under the SSP rebate scheme for the same employee but not for the same period of time.
Furloughed employees who become ill must be paid at least SSP and it is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate. If an employee is moved to SSP, organisations can no longer claim furlough payments although if employers keep a sick employee furloughed, and they pay the furlough rate, they remain eligible to claim for these costs through the furloughed scheme.
Holiday and furlough leave
On 13 May 2020 the Government published further guidance in relation to holiday and furlough leave. The guidance clarifies that individuals can take periods of holiday during furlough leave and that they continue to accrue holiday whilst on furlough leave. Employers can also require employees to take periods of holiday leave providing they give the required amount of notice.
Where it is not possible for individuals to take holiday because of coronavirus, then a portion of their leave can be carried forward into the next two holiday years, although Government guidance indicates that it is not anticipated individuals who have been on furlough will have been prevented from taking holiday.
The rate of holiday pay during furlough must be ‘the correct holiday pay in accordance with current legislation’, which is based on normal remuneration. Where this calculated rate is above the furlough rate of pay, the employer will have to pay the difference but will still be able to claim up to 80% (or £2,500 per month) under the CJRS.
As above, up to the end of June individuals could not undertake work for the organisation which placed them on furlough leave (although training could be completed). Where training is undertaken at the request of their employer and benefits the employer, individuals are entitled to be paid at least their appropriate national minimum wage for this time. In most cases, the furlough payment should cover these training hours but where the time spent training attracts a minimum wage entitlement in excess of the furlough payment, employers will need to pay the additional wages.
Individuals can work for another employer whilst furloughed. This could be a role an individual already had, or could be new work (with the agreement of the employer if this needs to be obtained under the contract).
Individuals who cannot work because they need to care for someone e.g. children, can be furloughed. Care needs to be taken when individuals are placed on furlough. Normal employment law rights remain e.g. discrimination rights and individuals cannot be selected for furlough on the basis of assumptions they will not be able to work because of caring responsibilities.
It has been clarified that employees who undertake duties as union or non-union representatives whilst furloughed may undertake duties and activities for the purposes of individual or collective representation, provided that in doing this they are not generating revenue for, or on behalf of their employer or a linked or associated organisation.
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Please be aware that this is the top line information relating to furlough leave. For more in-depth guidance or support around this and other employment law issues, please get in touch.
Please note this article is up to date at time of publication on 26 June 2020.
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