Emergency Volunteering Leave

The Coronavirus Act 2020 which came into force on the 25th of March 2020 introduces a new statutory right to take emergency volunteering leave (EVL).  It comes as no surprise that such measures were introduced, given that health and social care workers are under immense pressure to continue providing services and early signs show levels of absenteeism have increased.  In order to incentivise those who may be able to provide critical support, the government have introduced a variety of measures to address these pinch-points.  One of them being the introduction of an EVL scheme.

What is EVL?

The leave was introduced as part of emergency measures to help tackle the effects of the COVID-19 pandemic and is a new concept.  Statutory Emergency Volunteering Leave (EVL) will enable workers, employees and agency staff to take unpaid leave to volunteer in health and social care.  This could include a local council, district council or the NHS for example.  As EVL is a statutory right, workers and employees must not suffer detriments or be treated unfairly when exercising this right, although further regulations are required to formally implement the Act in this regard.

How do people apply for EVL?

Where an individual wants to volunteer, and in order to take EVL from their ordinary paid employment, they need to obtain an emergency volunteering certificate from the appropriate authority.  EVL can only be taken once in any “volunteering period” which last for 16-weeks.  The first one began on the 25th of March 2020 at which point the government may decide to set another period.

Employees or workers can choose to take unpaid volunteer leave in blocks of two, three or four weeks, including while on furlough leave.  However, changing from furlough leave to EVL would stop their period of furlough leave, and would mean they are ineligible for furlough pay during this period.  The 3-week minimum furlough claim period will still apply.

Do I have to pay them while they are on EVL?

The regulations suggest that a compensatory scheme will be introduced to financially compensate those for loss of earnings and expenses involved with their volunteer work, to ensure they are not disadvantaged by playing a key role.  As yet, there are no further details on what this scheme might look like, and the secondary legislation will hopefully clarify.  All other employment rights will remain in tact for the employee in the same way they would for any other leave taken, e.g sick leave, maternity leave.

Am I able to say no?

Generally, no, as this is a statutory right  However, there is an automatic exemption if you have a headcount of less than ten staff. If you employ ten or more individuals, you must grant EVL requests provided that the employee follows the relevant procedure, which involves giving written notice to the employer.

There are other categories of employees and workers exempted from insisting on EVL, which include those working in the Police and Military, Crown employees, Parliamentary employees and those others as specified by the Secretary of State.

For further information on this, and for any accompanying advice or documents, please get in touch with our HR experts.


Workplace pensions and Coronavirus

The current economic conditions are having a huge impact on us all, however it’s at times like this when we can support our clients and provide the guidance they need.

We have put together some Questions and Answers about what Employers or Employees may need to consider at this time in relation to meeting the Auto Enrolment Pension obligations.

Can the Furlough Grant be used to cover pension contributions?

Employers must pay at least the minimum AE employer pension contributions on behalf of their furloughed employees.  But they can only claim back the minimum AE employer pension contributions on the earnings paid.

The minimum mandatory employer contribution is 3% of income above the lower limit of qualifying earnings (which was £512 per month until 5th April and is £520 per month from 6th April 2020 onwards).

The employer will also need to consider their employment contracts, any scheme rules and communicate with their employees before they make any changes to the contribution levels

What if the employer’s scheme operates on a salary exchange basis?

Updated guidance from the Government makes it clear that the salary for calculating the grant should not include the cost of non-monetary benefits provided to employees, including taxable benefits in kind. Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary.

HMRC has confirmed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements if the relevant employment contracts are updated accordingly.

Can an Employer put their Pension on a “Contribution Holiday”?

The Pensions Regulator (TPR) have confirmed that they expect employers to continue making contributions into their scheme, and we would encourage any employers to do so if they can.

However, if the employer is concerned about whether they can meet their ongoing duties, we would suggest they speak to TPR but we are also here to help.

What should employers do if any members want to stop paying into their pension?

Members can stop their contributions at any time and should inform their scheme provider and Employer.

If an employee stops their contribution, automatic enrolment rules do allow employers to stop making their contributions.

If the member and/or the employer want to re-start the contributions, this can be done and again the member should inform the scheme provider and Employer of their intentions.

Getting in touch with TPR

If you need to get in touch with TPR here is a note of the website.


Holiday Pay Whilst On Furlough Leave

We have been asked lots of question about how annual leave effects furlough and what should be done with bank holidays, etc. Late on Friday 17th April 2020 HMRC updated their guidance and gave us the information to now answer your holiday questions.

Do employees accrue holiday whilst on furlough leave?

Yes employees will still accrue holiday whilst on furlough leave as per their employment contract. You and your employees can agree to vary holiday entitlement as part of the furlough agreement, however almost all workers are entitled to 5.6 weeks of statutory paid annual leave each year which they cannot go below.

Can employees carry holiday over into a new holiday year?

The government has introduced a temporary new law allowing employees and workers to carry over up to 4 weeks’ paid holiday into their next 2 holiday leave years. This law applies for any holiday the employee or worker does not take because of coronavirus, for example if:

  • they’re self-isolating or too sick to take holiday before the end of their leave year
  • they’ve had to continue working and could not take paid holiday

You are now able to allow your employees to carry over holiday if they’ve been ‘furloughed’ and cannot reasonably use it in their holiday year.

What happens if employees have pre-booked holiday and have now been furloughed?

Employees can still take holiday whilst on furlough, and still be eligible for the coronavirus job retention scheme at the same time. This would mean calculating there holiday days and paying them at their normal rate of pay as below.

How much do I need to pay my employees if they are on furlough leave and holiday at the same time?

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.

How much can I claim if my employees are on annual leave whilst furloughed through the coronavirus job retention scheme?

You can claim back 80% of employees salary up to a maximum of £2,500 even if they are on holiday whilst furloughed, but you must top up to 100% for the time they are on holiday.

My employees don’t usually work bank holidays, but they are currently on furlough. What should I do about the Easter bank holidays?

All employees are entitled to at least 5.6 weeks off per year, and many employers include bank holidays within that total. You have two choices with the recent bank holiday: 1) pay the employees at 100% for the two days, or 2) pay them 80% for the two days and then add two days back onto their annual leave allowance to take later in the year.

HMRC have also stated: “During this unprecedented time, we are keeping the policy on holiday pay during furlough under review”

If you’d like to talk through your specific circumstances with our dedicated HR Consultant please contact Lucy Pitfield on 07780 637999 or email: lucy.pitfield@nicholsonsca.co.uk


IMPORTANT : CJRS Claims, portal live on Monday 20 April

The latest guidance from HMRC was finally out last night & their portal opens 8am Monday. There are still some unanswered questions for HMRC, which the accountancy & tax professions are pushing for answers on, but the standard information is clearer now.

There are some fiddly bits, but most of the ‘we don’t know yets’ probably won’t affect most payrolls – but let us know if you have any employees on payroll with no NI number (eg from overseas or under 16yo), or any of zero hours contracts, or any new starters in late Feb/March, these are all trickier.

If we are preparing your claim, for example because we already operate your payroll, we will already have been in touch with you.

These are notes for those employers who are preparing their own grant claims. 

The process:

You will login through your employer’s Govt Gateway but you’ll need to also be registered for PAYE online and have an ePAYE number. Do this here: https://www.gov.uk/paye-online/enrol

It may be a struggle to get the claim uploaded, paid and into your account by 25th April, if you’re a ‘last Friday’ payday, but hopefully by 30th April, but this all depends on whether the portal is stable to cope with the millions of users!

If you don’t have funds to make the April payrolls, you should put a contingency plan in place.  Speak to us if you need further help with this.

You’ll make your first grant claim for March and April together, then one per pay period after that.  You can upload your grant claim from 14 days before the payday.

Get all your information ready for the claim – suggest you’ll need a spreadsheet! You’ll have to enter all furloughed employees individually if you have less than 100, you can bulk upload an excel spreadsheet if you have more than 100 employees to claim for.

There is no ‘save and return’ option and you’ll be kicked off after 30 mins of inactivity – so keep doing keystrokes to keep yourself on there, whilst you check information.  Try and be as prepared as you can be before you logon.  There will be a calculator on the portal if you are stuck but try and work it out yourself on spreadsheet first, as that will be quicker.

Common situations:

  1. Holiday Pay – you can allow holidays & it doesn’t break furlough (which otherwise needs to be a min of 3 weeks each time); but you have to claim just 80% for the grant amount & then top up to 100% for your payroll; same for bank holidays, if they’re normally taken as leave. Or you can just assume it’s a working-furlough-day, claim the furlough amount & add their extra holiday days onto entitlement for ‘post lockdown’.  Your decision probably depends on how much all these accrued holidays are going to cause you a problem later in the year. You need to remember that the holiday top up element is not just basic pay that you might have used to calculate the furlough grant element but should include commission, bonuses etc.
  2. If you normally claim £4k NI employment allowance (based on your business’ last year’s Class 1 Employers NIC being less than £100k) then you still have to take that in April, and until it’s used up. You will probably need to do some working out of this on a spreadsheet, as the Employers NIC element of your grant must be the lower amount.
  3. The worked examples on the HMRC handout show how to calculate pro-rata pay and NIC for furlough/non-furlough days –you include all dates in the month, 7 days a week.  If you are using average pay because they had uneven pay amounts, check what you can and cannot include (list on handout) and note that you need to average it for the tax year 2019/20 up to the date each employee was furloughed – using number of days from 6th April 2019 until the date they were furloughed (if before 6/4/20).  The worked examples in the handout are useful. HMRC HANDOUT

Suggestions:

  1. prepare a reconciliation sheet of your grant claim & eventual payrolls – there may be some adjustments to make such as topping up apprentices to App Min Wage, topping up holiday pay, or pension contributions, for example;
  2. if there is anything you’re not sure about, make a judgement and note why you considered that to be the correct treatment. Then you can check in the coming days/weeks when things are clearer & adjust either grant claims and/or payrolls next time.
  3. Make sure you write down the submission number or take a screen shot as HMRC are advising an email confirmation will not be sent!

IMPORTANT INFORMATION – Coronavirus Job Retention Scheme – Portal opens Monday 20 April 2020

HM Revenue & Customs (HMRC) has confirmed that the online portal for applications to the Coronavirus Job Retention Scheme (CJRS) will open on Monday 20 April 2020.

Brief recap

The CJRS provides grants worth 80 per cent of a furloughed employee’s salary up to a cap of £2,500 a month, plus Employers’ National Insurance Contributions (NICs) and minimum employer auto-enrolment pension contributions. Furloughed employees are placed on temporary leave and may not carry out any work during the period of furlough. Any employee on your PAYE payroll on 28 February 2020 can be furloughed, including those who have subsequently left but who you are prepared to take back on. The scheme is backdated to 1 March 2020 and is in effect until the end of May, although the Government has said it will be extended if necessary.Please read our guide to the Job Retention Scheme,our employment FAQ’s and guide to furloughing Directors.

HMRC grant portal will open on Monday 20 April 2020

We have spoken to many of our clients about the process of furloughing employees and have assisted them with the paperwork and collation of data. If we have spoken to you already about the JRS one of our team will be in touch with you within the next 6 days (by Wednesday 15 April) to discuss your claim. This will ensure that we have all of the information on hand to process claims as quickly as we can.

We understand that claims will be able to me made 14 days in advance of running a payroll and with a forecast 4-6 day payment period after the claim is submitted there is a chance that grants could be received before payroll payments are made.

The information that will be needed to make a claim will be:-

  • Your PAYE reference number,
  • Number of employees being furloughed,
  • The claim period (start and end date)
  • The bank account number and sort code you’d like the claim to be paid to.
  • The name and phone number of the person HMRC should call if there are queries.
  • Your Self-Assessment UTR or Company UTR
  • The name, employee number and NI number for each furloughed employee
  • The total amount being claimed for all employees in the period.

HMRC have indicated that they hope businesses will receive monies before the end of April and they are putting significant resources behind the portal. To assist, they have asked professional payroll advisers, like the team at Nicholsons, to help support them by supporting business owners calculate and made claims.


Can a Company Director be furloughed?

The term ‘Director’ is not defined in the Companies Act 2006 – it is simply provided that a director “includes any person occupying the position of director, by whatever name called.”

In recently updated guidance (4/4/2020) HMRC provided clarity over whether directors and office holders could be put on furlough leave (i.e. be furloughed). Until this guidance had been provided there was a lot of debate as to how directors would fulfil their statutory obligations to the company.

The advice confirmed that provided pay is through PAYE then directors can qualify for the Job Retention Scheme and companies can receive grant funding as already laid out by the scheme as with other employees.

Can I still work? 

Directors owe duties to their company which are laid out in the Companies Act 2006. The guidance says that “Where a company (acting through its board of directors) considers that it is in compliance with the statutory duties of one or more of its salaried directors, the board can decide that such directors should be furloughed.”

When this decision is made it should be formally adopted as a decision of the company and recorded as such in the company minutes. This should then be confirmed in writing to the director(s) concerned – typically by way of a furlough agreement.

Where a furloughed director needs to carry out a piece of work to fulfil a statutory obligation then they can “provided they do no more than would reasonably be judged necessary for that purpose, for instance they should not do work of any kind they would carry out in normal circumstances to generate commercial revenue or provide services.”

This is of particular importance to people who trade through a limited company.

Non Executive Directors

A number of clients have asked us if they can furlough directors who may otherwise be known as “non-executive directors” e.g. whilst still on the payroll, they are not part of the day to day running of the business undertaking a role as an executive director would.

It is not easy to distinguish between the two sometimes, but an executive director is usually someone who carries out executive functions in the company and is a full-time employee of the company.  Conversely, a non-executive director may provide occasional support and guidance as an advisor, or look at the operations strategically, but on a day to day basis they would have no real involvement.

Whilst the rules don’t expressly say “non-executive directors are not eligible for the furlough scheme” the scheme does say that employers can use the scheme to “furlough employees” and therefore, a non-executive director won’t be eligible for furlough, because they are not an employee.

Does my business qualify?

The updated guidance for employers says that the scheme is for employers who “cannot maintain their current workforce” because of coronavirus. However, the guidance also says that “all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.”

HMRC do not ask for evidence that a worker would otherwise have been made redundant. However, the guidance does say that “HMRC will retain the right to retrospectively audit all aspects of your claim.”

It is worth bearing in this mind that this scheme is not legislated, and HMRC do reserve the right to change the rules, audit and inspect any claims to ensure those being claimed for are eligible for the scheme.


Further Furlough FAQs – New Guidance Recently Published

Furlough FAQS – Coronavirus Job Retention Scheme

Published 4th April 2020

The government has recently updated its furlough guidance giving answers to questions we all had in relation to the scheme, and how to ensure businesses were able to meet the very vague criteria of the initially published furlough scheme.  We have added the answers to some of our commonly asked questions, now that we are in a position to provide official clarity.

How long will the scheme run for?

This is a temporary scheme designed to help employers who have been severely affected by the COVID-19 crisis and to protect the economy.  The scheme runs for 3 months from the 1st of March 2020.  There are no current plans to extend the scheme beyond the 31st of May 2020 and so employers need to time this correctly, and consider what may happen if there is still no work to do at the end of this period and the scheme ceases to continue.  In this situation there may be redundancies, and usual employment laws apply to this process.

Can I furlough an employee, bring them back, and place them back on furlough leave?

Yes, provided that the employee is off for a minimum of 3 weeks for each period of furlough, and taking into account the end date for the scheme.  This allows you to bring somebody back into the business to undertake essential duties for short periods of time.

What if somebody is sick during furlough?

As it currently stands, furlough leave must be for a minimum of 3 weeks so the employee would need to notify you of their sickness in the usual way.  If they would have been too unwell to work, then this would end their furlough leave and change it to sick leave and could break the furlough leave period of 3 weeks, meaning the employer may not be eligible to receive the grant for any of that furlough leave period.

Can an employee work elsewhere whilst they are on the scheme?

It will depend whether you permit this within your contracts of employment.  The guidance says this *is* possible but HMRC may look at their earnings and there is always a possibility they won’t pay out if an employee is working elsewhere for the same hours they are on furlough leave for you, and being paid 80% of taxpayer money.  This scheme is not legislated so it is down to HMRC to set their own rules and employers should bear this in mind.  If the employee had another job as of the 28th of February 2020 then they can be furloughed from one job, and continue to work in the other.  This date was implemented to prevent fraudulent activity e.g. people hiring family members after the scheme was announced.

Can someone take holiday leave whilst on furlough?

This is a tricky area which has not yet been clarified, and there are arguments for both cases.  The concern is that holiday leave *may* break the period of furlough leave and make employers ineligible for the grant.  You should take specialist advice from our HR experts on your individual situation.

Can my employees undertake training for the company whilst furloughed?

Yes, and this includes apprentices.  The furlough payment they receive from you must cover all the hours spent training at National Living Wage/National Minimum Wage.  If this payment is not enough, then employers need to top it up to the age-appropriate rate.  However, if someone is already paid NMW/NLW or close to this and you are asking them to undertake training for a significant part of their furlough leave, you are advised to seek specific advice.  In addition, this may affect any furlough leave that is designated as holiday leave, if the scheme permits this in later guidance.

What can be included for furlough payments?

The guidance has changed on this point.  The original guidance published on the 26th of March 2020, which we followed for advisory purposes, stated that the payment could not include bonuses, commissions or fees.  It would appear the approach has been relaxed now, and the guidance now states:

“You can claim for any regular payments you are obliged to pay your employees. This includes wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.”

The scheme goes on to say that any BIKs (Benefits in Kind) are not provided for on the scheme, but the employer may still be contractually obliged to pay these.

There are specific rules about salary sacrifice arrangements and how these may be managed; please take expert advice on this from one of our team.

Can a company director be on furlough leave?

Yes, the grant can be claimed for any of the following groups, if they are paid via PAYE:

  • Office holders (including company directors)
  • Salaried members of Limited Liability Partnerships (LLPs)
  • Agency workers (including those employed by umbrella companies)
  • Casual workers

There are some specific considerations in terms of working out and calculating the pay in each of the groups.  We can provide more specific information depending on the circumstances.

Do I have to rehire someone who has left and can’t be furloughed with their new employer?

There is no obligation for you to do this, but you are permitted to rehire and furlough them.  The decision is a moral one and depends on whether you agree to this as the former employer.  They must have been on your payroll as of the 28th of February 2020.  The scheme allows you to rehire those you have made redundant already, as long as they were on your payroll as of the 28th of February 2020.

Can I undertake statutory duties if I am a furloughed director?

Company directors owe duties to their company which are set out in the Companies Act 2006.  The guidance states that:

“Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided they do no more than would reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company.”

This also applies to companies which provide a personal service (PSC) with a sole director.

There is a slightly more stringent process to follow in this scenario, which we are happy to guide you through, as well as the calculations for furloughed pay.

Can an employee do any work or volunteer for me whilst on furlough leave?

Not if you want to receive the grant from HMRC!  They have promised to audit this vigorously and will demand repayment of any erroneous or fraudulent claims.  In addition to this, they have the right to impose fines and/or prosecute those abusing the scheme.  Furloughed employees must have their furlough leave agreed in writing with you and you must keep a record of this for a fixed period of time – we are happy to provide a complimentary agreement for our clients to use with furloughed staff.

We are sure there will be many more questions as time goes on and the scheme continues to evolve, and our HR specialists are on hand to provide you with the latest advice to guide you through this difficult time.

Please contact our team on hrmail@nicholsonsca.co.uk and we will be happy to call or email you back as quickly as possible.

Will the grant be taxable?

Yes, HMRC confirmed that the grant must be included as income in the business’s calculation of its taxable profits. It should be noted however that as the grant covers the cost of employment the net effect on profits should be nil.