Flexible Furlough Scheme – new rules from 1 July 2020.

Flexible Furlough Scheme – FAQs

Published 13th June 2020

After much anticipation, the guidance was finally published last Friday to make clear the rules surrounding the Flexible Furlough Scheme which is due to launch on the 1st of July 2020. The deadline for putting employees onto the current Furlough Scheme has now passed in order to meet the 3-week minimum requirement. What do these new rules mean for employers? We have put together some frequently asked questions our HR experts received in the lead-up to the scheme.

Can I put an employee onto the scheme who has been on maternity, shared parental, adoption, paternity or parental bereavement leave?

It appears that this is permitted even if you are furloughing them for the first time. You can do this on the proviso that you have previously submitted a claim for any other employee in your organisation in relation to furlough for at least 3 consecutive weeks between 1st March 2020 and 30th June 2020. This means that if you have not used the scheme before for any other employee, you won’t be able to furlough your employee who is returning from one of the leave types mentioned above. They also need to have been on your PAYE payroll on or before the 19th of March 2020 with the relevant RTI submission being made.

Do I have to put an employee on for a minimum period?

No, the only requirement for this is any employees who are furloughed between the period of 1st March 2020 to 30th June 2020. From the 1st of July 2020, provided that an employee has been on a previous claim you have made as the employer for at least 3 consecutive weeks, you are able to flexibly furlough them as you need to, and in line with all employment laws.

If I’ve made someone redundant, can I bring them back and flexibly furlough them for a longer period?

Yes, provided they were made redundant after the 19th of March 2020, met the previous criteria, and have been on a previous furlough claim you have made for them as their employer. Depending on the period of time between making them redundant and bringing them back, there may be tax implications in relation to any statutory redundancy payment made, therefore employers should take advice as necessary on their situation.

Is there a minimum requirement for how long someone can be brought back for?

No – not from the 1st of July 2020, it is a flexible arrangement subject to them qualifying for it. There is a minimum claim period of 7 calendar days, though.

Will they be paid at 80% when they work for me or will this be 100%?

Employees can either remain fully furloughed at 80% (no 3-week minimum period) from the 1st of July 2020 which would be at 80% or greater depending on your agreement with them, or they can return to work flexibly, receiving the agreed furlough amount for the hours they aren’t working and their normal pay for the hours they are. It is worth noting that National Living Wage and National Minimum Wage increased in April 2020 so any hours being worked must be paid at the relevant statutory rates.

How do I claim for the money?

Using the same portal as before, presumably there will be some sections which will be re-worded, but you must keep records of how many hours your employees work and how many they are furloughed for, for five years.

Do I need a new agreement with my employees?

Yes, the newly issued guidance on the 12th of June 2020 states that you’ll need to agree this with the employee and keep a new written agreement that confirms the new furlough arrangement for five years, ensuring it complies with all employment laws. We are happy to provide this agreement complimentary to Nicholsons clients – please email hrmail@nicholsonsca.co.uk to request a copy.

It is worth bearing in mind that legislation will be added to the Finances Bill very shortly which will allow tax officials to recoup erroneously claimed public funds, which comes with a risk of criminal prosecution. This is understandably the last thing employers will need given the current outlook, so ensure you take professional advice on your circumstances if you are unclear.


Chancellor unveils changes to Coronavirus Job Retention Scheme (CJRS)

The Chancellor, Rishi Sunak, has announced a series of changes to the Coronavirus Job Retention Scheme (CJRS) from July that will see furloughed employees able to return to work part-time, but with the value of Government support reducing gradually from August.

Rishi Sunak, Twitter feed 29 May 2020

The changes in summary

  1. The scheme will remain in its present form for those who need it until the end of July with no additional costs to the employer.
  2. From August the employee will still receive 80% of wages when fully furloughed but the employer will no longer be able to reclaim the pension and NI contribution – they will have to meet that as usual.
  3. From September the employer will be required to pay the pension and NI together with 10% of the 80% furlough wages that the employee receives.
  4. From October that contribution from the employer will increase to 20%.
  5. From 1 July there will be the introduction of a flexible furlough scheme where employees may be asked to come in to work on full wages for part of the week and receive the 80% of wages for the time they are not working (subject as above to the contributions set out).

The changes to the scheme

A system of ‘flexible furloughing’ will come into effect from 1 July, allowing employers to bring back furloughed employees for any amount of time on any shift pattern, while still able to claim a grant in respect of the time not worked when they otherwise would.

Employers will have to pay employees at their usual rate of pay for any hours they work, while also covering the cost of Employer National Insurance Contributions (NICs) and minimum employer automatic enrolment pension contributions that this pay attracts.

They will need to reach new flexible furlough agreements with any furloughed employees brought back on a part-time basis.

From 1 August, CJRS grants will cease to cover Employer NICs and pension contributions, with this cost passing to employers. The grant will continue to cover 80 per cent of furloughed employee’s usual wages, up to a cap of £2,500 a month.

However, from 1 September, the value of the grant will fall to 70 per cent of a furloughed employee’s usual wages, capped at £2,187.50 a month. Employers will be expected to contribute the remaining 10 per cent plus NICs and pension contributions to reach a combined total payment to the employee of 80 per cent of their usual wages, up to a cap of £2,500 a month.

October will see the value of the Government contribution fall again to 60 per cent, capped at £1,875 a month, with employers expected to contribute 20 per cent of a furloughed employee’s usual wages plus NICs and pension contributions to reach the total of 80 per cent, capped at £2,500 a month.

At the same time, the Chancellor confirmed the closure of the scheme to new entrants from 30 June. After this point, employers will only be able to furlough employees who have been furloughed for three full weeks at any point before 30 June.

This means the last day an employer can furlough an employee for the first time will be Wednesday 10 June.

Furthermore, after 30 June, employers will not be able to claim for more employees in a claim period than the maximum number they have claimed for in any period under the scheme in its current format.

Full details of how the scheme will operate from this point are expected to be announced on 12 June 2020.

An example 

  • In July you may ask an employee to return from furlough for 2 days per week.  You will pay them 100% of their normal wages for those 2 days and you can still claim the other days at 80% plus pension and NI contributions
  • In August you may bring back more employees (or increase or decrease days of work) from furlough on, say, 3 days per week.  You will pay those employees 100% of their normal wage for those 3 days.  For the 2 days they are not at work you can claim 80% of their wages but you will have to pay the pension and NI contribution
  • In September you bring back more employees on flexible furlough working 3 days per week.  You will pay 100% of wages for the days worked but will still be able to claim 70% of the employee’s wages for the days they do not work.  You will, however, HAVE to pay 10% of their 80% wages (their income does not go down) and the employers’ NI and pension contributions
  • In October the employer contribution increases to 20% plus pension and NI and then closes on 31 October.

The announcement comes against the background of an easing of the lockdown restrictions that have closed down large sections of the economy since late March, with the Government now encouraging certain sectors back to work.

Guidance still to work from home, where possible

Where it is possible to do so the Government guidance is that working from home should continue for those who are able to do so.  People furloughed because of shielding (which has been extended for the foreseeable future) or because of childcare issues will be paid as set out above.

However, those who are struggling with childcare issues should be able to potentially return at least part time when schools and nurseries and other childcare settings such as childminders are allowed to open again.  HOWEVER it is important to bear in mind that with July comes the school holidays and for many it is grandparents who bear the burden of childcare.  We do not yet know whether restrictions will be lifted enough by then for grandparents to take on their usual caring roles.

CJRS and record keeping. 

The CJRS was announced by the Chancellor in March and currently allows employers to furlough any employees who were on a PAYE payroll and reported to HM Revenue & Customs (HMRC) through the Real-Time Information (RTI) system by 19 March 2020.

Since then, more than a million employers have collectively claimed £15 billion from the scheme in respect of 8.4 million employees, via the Government’s online portal.

The announcement comes days after the Chancellor issued a new Direction to HMRC, updating the record-keeping requirements of the scheme.

Under these requirements, the written agreement that the furloughed employee will, under the current terms of the scheme, cease all work must be retained until 30 June 2025 and:

  • State the main terms and conditions;
  • Be incorporated either expressly or implicitly in the contract of employment; and
  • Be either made or confirmed in writing.

It is widely expected that HMRC will audit use of the scheme retrospectively over the coming months and years, with potentially hefty penalties for those found to have acted improperly.

1.6.2020


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.