Update: Coronavirus Job Retention Scheme FAQs

The Coronavirus Act 2020 achieved Royal Assent on the 25th of March 2020 and the Act is now published online.  As a result, further details have been published about the Coronavirus Job Retention Scheme, which includes furlough leave.

Although there are many questions left unanswered by this recent publication, there is some clarity on a few points.  Having been asked several questions on the scheme which we can now answer with a degree of certainty, we thought it helpful to publish these below.

Can I furlough somebody and then take them off furlough?

This is still not clear, however, you must furlough for a minimum period of 3 weeks.  If you have furloughed somebody for 2 weeks then they will not be eligible for the government funding and you will need to fund it yourself.  Prior to this official announcement, the Nicholsons HR team were advising clients to furlough people who would be likely to be off for a longer period of time, which we can now see was the correct advice.

What we don’t yet know for definite is if somebody can be furloughed for 3 weeks, returned to the business and then re-furloughed.  If this is possible, then the minimum 3-week furlough period would still apply to each instance.

Can I put someone onto furlough who started at the beginning of March?

Yes, but you’ll need to pay them yourself as you won’t be eligible for funding.  The government have said that this applies to anybody who was on PAYE as at the 28th of February 2020.   We don’t know for definite why this is the date set but we believe it’s due to it being the last Friday and working day in the month and therefore, everyone would have been paid by then.

How long does the scheme run for?

The scheme is open from the 1st of March 2020 to the 31st of May 2020, the government have said they will consider extending but this is not a guarantee.

How much is the maximum?

Employers can reclaim up to 80% of wage costs to a cap of £2,500 per month, in addition to the associated employer NICs and minimum auto-enrolment pension contributions for their pay.  The guidance says that  fees, commissions and bonuses are not included.

However, the published guidance refers to ‘usual monthly wage costs’ and therefore, if a bonus is paid regularly, we think this needs further clarification from the government in line with developed case law in holiday pay – leading case Lock v British Gas Trading Ltd [2014] so we will need to await further guidance in this area.

What about zero hours and casual workers?

These are covered by the scheme, as well as agency workers who aren’t working.  Our team can help you with the necessary calculations, but the key message is that they will be eligible.

What about National Minimum Wage if I only pay 80% of their wages?

As minimum wage is only payable for hours worked, this wouldn’t be a breach because on furlough leave, no hours are being worked.

However, when minimum wage increases in April, we don’t yet know whether the furlough pay will need increasing in line with any uplift.  We suspect it will though.

My employee has a second job, are they still allowed to work whilst being furloughed from my company?

Yes, if they had 2 jobs as of the 28th of February 2020.  Those who are self-employed as well as employed will be eligible for one scheme or the other.  The self-employed scheme will only be available to them if that is their main source of income.

We don’t anticipate that it will be possible for an employee to be furloughed from their full-time job and then take up work elsewhere as it defeats the object of the scheme – to preserve employment and avoid redundancy, not to “boost” earnings with public money.  Employees also need to be available to return to work at any time from the job they are being furloughed from.

The scheme is expected to be up and running from the end of April.

For further information or specific guidance in any situation, please do not hesitate to contact our HR experts on hrmail@nicholsonsca.co.uk

We aim to reply to all queries within 24 hours due to the current high levels of queries we are receiving, but will always reply sooner wherever possible.

 


UPDATE : Coronavirus Job Retention Scheme

Following a meeting with HM Revenue & Customs (HMRC) yesterday the Institute of Chartered Accountants in England and Wales (ICAEW) have issued some notes on how they believe the Coronavirus Job Retention Scheme will work.

The notes below provide an update to our original piece published earlier in the week which is copied below for reference.

Updates 

  1. HMRC will be the body that administers the grant scheme.
  2. Now confirmed that Charitable and not for profit organisations will be eligible.
  3. Whilst the scheme is backdated to the 1 March grants will only be available when employers have agreed furlough terms with their employees and they have stopped work, subject to employment law in the usual way.
  4. Available to all employees on the payroll at 29 February.
  5. The employer will pay the employee through payroll and as such RTI submissions will still be maintained. This actually makes a lot of sense as it is a system that already works well.
  6. Relevant employees must be designated as furloughed employees.
  7. The scheme will not cover dividends where directors/ shareholders of owner managed companies pay small salaries and the balance as dividends.
  8. The grant will cover all employment costs including; salary, employer pension contributions and employer NIC.

Illustration

Illustration (taken from the ICAEW article) shows how the grant would be calculated. Note assumes no pension payments. If a pension was paid (i.e. Mr A was opted in) the grant would cover this too being 80% x (£2,000) + Ers NIC + Ers Pension subject to the £2,500 cap. Note that the Ers NIC and Pension will be calculated using the new 80% salary as reference.

The original ICAEW article can be found here

Funding problems

One of the problems with the scheme is the delay in being able to make claims and receive funds. If an employee was furloughed on 20 March there could be 11 days available for the March claim.

The employer would need to pay the employees net pay on 31 March and 30 April well before potentially being able to make a claim in early May for receipt sometime in mid to late May.

Whilst we can’t be sure this will apply for all businesses, Banks may be willing to extend or arrange overdrafts for a limited time for the amounts expected to be claimed.

For advice on how you can implement this scheme including HR, Payroll, support making claims and working through cash flow please contact our team dedicated to dealing with the Job Retention Scheme; Lucy Pitfield, Simon Hall and Steph Smith on 01522 81 5100. 

Original Article (published 21 March)

The Government has announced a new scheme to protect people’s jobs during the crisis. The scheme is open to all UK businesses and will see the Government pay part of the wages of employees that would otherwise have been laid off. The scheme will be open for an initial three months from 1 March however Rishi Sunak said “… and I will extend the scheme for longer if necessary”.

This is a grant from the Government, not a loan, so it will not need to be repaid.

To access the scheme employees, or certain employees, need to be designated as “furloughed workers”. You will need to notify these workers of the change, in writing (email will be fine) making sure you follow a fair selection process.

It’s worth noting that the Government is not changing employment law to allow this to change in status. Therefore, making this change to an employee’s status remains subject to employment law.

You have the option of topping up the remaining 20%, but it is not mandatory.

You must not make the employees redundant and guidance will most likely be issued, in due course, about the time frame the Government expects you to keep them employed after society and business can return to normal. If you have already laid staff off, you can reverse this decision if you wish, as this scheme is backdated to 1st March.

HMRC are developing a system that will allow employers to provide this information through an online portal and once processed they will issue reimbursement. At the time of writing this (21 March 2020) there was no method of reimbursing these costs and the system isn’t expected to be available until April.  Therefore, managing cash during this intervening period is still crucial (see our advice about cash flows).

There is a cap on the reimbursement of £2,500 of the employee’s wage costs per month, based on their regular salary. It should also be noted that the employee should be shown on the February pay run and that a claim will be possible for periods from 1 March 2020.

It is not clear yet how much those on zero hours’ contracts or fluctuating wages will be treated, but it is expected that it will be either the amount which was paid through last month’s payroll or an average of the past few months.

Careful planning and consideration of employee’s contracts of employment is required when considering this scheme but it is certainly a significant boost to companies in what are unprecedented times.


Payroll professionals confirmed as key workers

Our team are here and ready to support you

Payroll is a vitally important function within a business and never more so now that the Government has confirmed that it will be paying furloughed workers* up to 80% of their wages through reimbursement via HMRC.

During these uncertain times, businesses must know that they can rely on the support of their payroll advisers to keep employees paid and their records up to date in line with the Government’s latest measures.

As the Department for Education has confirmed that payroll professionals are classified as key workers, we wanted to assure you that our team are standing by to help you deal with the constantly changing complexities of payroll during this crisis.

If you need payroll advice during these challenging times our team are available and ready to help, so please contact us on 01522 815100.

*Under the new Coronavirus Job Retention scheme, government grants will cover up to 80% of the salary of PAYE employees who would otherwise have been laid off during this crisis. The scheme, open to any employer in the country, will cover the cost of wages backdated to 1 March 2020 and will be open before the end of April. It will continue for at least three months, and can include workers who were in employment on 29 February.   Employees still working, full time or part time or on shorter hours will not qualify.

To claim under the scheme employers will need to:

  • designate affected employees as ‘furloughed workers’, and notify employees of this change. Changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation; and
  • submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal. HMRC will set out further details on the information required.
  • HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month.
  • While HMRC is working urgently to set up a system for reimbursement, we understand existing systems are not set up to facilitate payments to employers. Business that need short-term cash flow support, may benefit from the VAT deferral announced below and may also be eligible to apply for a Coronavirus Business Interruption Loan.

Furlough FAQ’s, some early thoughts from our HR team

The Chancellor announced package of measures to help businesses on the 20th of March 2020.  One of those being the Coronavirus Job Retention Scheme, part of which is the introduction of Furlough Leave.

What is Furlough Leave?

There is very little information to go on at present, and Furlough Leave is not currently recognised in UK Law as it is an American term.  However, it has been introduced to allow UK employees to access financial pay support and means the government will continue to pay an employee’s salary/wages for those that would otherwise have been laid off (or made redundant).  All UK businesses are eligible e.g. sole traders, limited companies, partnerships etc, as long as they have employees.

How do I put someone onto Furlough Leave?

Employees need to be designated as furloughed workers and notified.  It will mean a change in status, which is still subject to current employment laws and may require negotiation.  In some contracts there is a right to do this, but some don’t contain the relevant clauses and therefore agreement will need to be reached.

How do I claim the money for Furlough Leave?

Once you have designated an employee as a furloughed worker, you need to submit information to HMRC about them and their earnings through an online portal which is not yet set up.  HMRC will reimburse 80% of the furloughed worker’s wage costs up to a cap of £2,500 per month.  Whilst it is currently unclear, it is anticipated that £2,500 is 80% of £3,125 per month rather than the cap being on a salary of £2,500 per month and then paying 80% of that salary.  The payment will come to the employer and not to the employee directly.  The government are working quickly on getting the system up and running.  The government will also make any contributions on the 80% such as pension and employer’s National Insurance.

Can I ask the employee to reply to emails and work a little whilst on Furlough Leave?

No, the Government specify in their guidance to employees that in order to qualify for the scheme, they should not undertake work for their employer while furloughed.  We expect this principle applies for all work, and employees must not undertake other work and use the pay to subside their earnings.  It should be clear to them that they are on furlough.  It is not clear whether they would be allowed to work elsewhere to “top-up” the remaining 20% of their pay that they are not receiving and we will need to wait for the government to issue further guidance.

Do I have to pay 20% if the government is paying 80%?

Whilst the employer’s guide is silent on whether they have to pay 20% of the pay to top up to the employee’s normal level, the guide for employees says that the employer can choose to pay this but it does not have to.  Therefore, it is anticipated that this will be voluntary.  Employers need to ensure they have the contractual right to do this and will need the agreement of the employee to do so, otherwise they run the risk of a tribunal claim in the future.

What happens if an employee wants to be put onto Furlough Leave but I don’t want them to?

The employer still has to agree that the employee is on furlough leave and without agreement it won’t happen, they cannot just opt to stay at home as a preference.

Can I still make someone redundant rather than furlough them if I want to?

We don’t yet know the answer to this and need to wait for guidance, there is nothing to suggest that you can’t but there is also nothing yet published to say that you can!

If an employee has already been made redundant, can I change this to furlough?

This may be possible subject to any provisions the government makes to prevent abuse (e.g. ‘hiring’ family members for 80% salary at £2,500 per month) and the usual notice period.  We do not have any further guidance on this though until the regulations are published.  Although the government have said furlough can be backdated to the 1st of March, we don’t yet know if there is an effective from date e.g. you need to have been employed by XX date to be eligible to rescind your redundancy and change it into furlough leave.

How will it work for casual workers/zero hours workers?

The Chancellor said it would apply to anyone on PAYE and they would be paid an amount based on their average pay (but no details yet about the time-period it would be calculated over).  We don’t yet know how they would calculate this for casual or zero hours workers, or whether any would be excluded.  Based on the Chancellor’s comments about PAYE, it would suggest that they will be eligible, but we will need to wait for the official guidance.


Coronavirus Job Retention Scheme

The Government has announced a new scheme to protect people’s jobs during the crisis. The scheme is open to all UK businesses and will see the Government pay part of the wages of employees that would otherwise have been laid off. The scheme will be open for an initial three months from 1 March however Rishi Sunak said “… and I will extend the scheme for longer if necessary”.

This is a grant from the Government, not a loan, so it will not need to be repaid.

To access the scheme employees, or certain employees, need to be designated as “furloughed workers”. You will need to notify these workers of the change, in writing (email will be fine) making sure you follow a fair selection process.  It’s worth noting that the Government is not changing employment law to allow this to change in status. Therefore, making this change to an employees status remains subject to employment law.

You have the option of topping up the remaining 20%, but it is not mandatory.

You must not make the employees redundant and guidance will most likely be issued, in due course, about the time frame the Government expects you to keep them employed after society and business can return to normal. If you have already laid staff off, you can reverse this decision if you wish, as this scheme is backdated to 1st March.

HMRC are developing a system that will allow employers to provide this information through an online portal and once processed they will issue reimbursement. At the time of writing this (21 March 2020) there was no method of reimbursing these costs and the system isn’t expected to be available until April.  Therefore, managing cash during this intervening period is still crucial (see our advice about cash flows).

There is a cap on the reimbursement of £2,500 of the employee’s wage costs per month, based on their regular salary. It should also be noted that the employee should be shown on the February pay run and that a claim will be possible for periods from 1 March 2020. It is not clear yet how much those on zero hours’ contracts or fluctuating wages will be treated, but it is expected that it will be either the amount which was paid through last month’s payroll or an average of the past few months.

Careful planning and consideration of employee’s contracts of employment is required when considering this scheme but it is certainly a significant boost to companies in what are unprecedented times.


COVID-19 and Employment FAQs

We do hope that you find the information below useful. If you would like any further help or support please contact Lucy Pitfield – 07780 637999 or Laura Reilly – 07559 905540

Q – What should I tell staff?

A – Be honest with your staff, as honest as you can be without causing panic. It is better to speak to staff earlier on and ideally face to face as many will be reading news stories or hearing things from friends and panicking. Before speaking to them you should have an idea of where you might need to steer your business and your financial position, as many will have questions. The key message is that everyone needs to pull together to get through this, businesses can and will survive, flexibility and appreciation is key!

Q – I want to do the right thing by the staff but I also need to make sure I have a business for them to work in – what should I do?

A – It comes down to being honest. Whilst you don’t want to panic people, there is no point watering down the severity of the situation as it stands. The key thing is always to be open and transparent, listen to concerns, alleviate them where possible and don’t make false promises. In terms of accounting, making sure you apply for any grants you may be eligible for, have conversations with your bank and look at any loans or other financial relief early on where possible. You can share with staff that you are looking at everything to ensure you remain as financially stable as possible but may need their help and flexibility to do this.

Q – I can’t afford to ask everyone to be on holiday as I have no money coming in, what should I do?

A – In this situation you could ask the employee to take unpaid leave, or, if they are a primary carer for a dependent, they could take ‘Parental Leave’ which is unpaid. Employees are eligible to take up to 4 weeks a year to a maximum of 18 weeks until the child’s 18th birthday. In the meantime, they should look at their own financial position and seek government help if required.

If you believe this situation will be very short-term, you may have the right to put employees on LOST (lay off or short time working) which will depend on your employment contracts. We can have a look for you and advise what your position is.

Q – Good staff are hard to come by so I don’t want to lose them, but I can’t afford to keep them, what should I do?

A – It is always better if you can reach an agreement with your employees, many people will understand the situation is difficult and will need employment to return to. You could agree a sabbatical or career break (for those employees who may have financial means to support themselves for a period of time), look to reduce hours or lay employees off temporarily, approve leave for them, or ultimately, consider redundancies, if you have no other choice. If you want to retain staff then it will require some advice on your contractual position and some creative thinking on hours and staff cover, which we can help with.

Q – If I lay off staff are they allowed to work for someone else?

A – It will depend on what the contract says but sometimes, yes. Employees may be eligible for benefits during a period of being laid off, as they are still employed by you, but are not receiving an income. As contract clauses are written differently from business to business it’s better to have them checked before relying on them.

Q – What are the rules on isolation? Do I have to pay them if they are isolating?

A – If employees have chosen to be in self-isolation and have no symptoms, and nobody in their household has any symptoms, then this is technically an unauthorised absence. If somebody within their household has symptoms or is confirmed as having COVID-19, they are eligible for SSP (Statutory Sick Pay) from day 1 and for 14 days thereafter (the recommended isolation period). If they are unwell themselves, they are entitled to SSP from day 1, and this will be claimed and paid in the normal way. It is not expected that many cases of COVID-19 will require a long recovery, but illnesses can affect people differently. If somebody is infectious then they can obtain advice and a certificate by calling ‘111’ and not going to their GP practice, potentially infecting others. They should still follow your normal absence reporting guidelines.

Q – What if staff have to be off with their children?

A – If staff need to be off with their children because they don’t have childcare, then they shouldn’t be penalised for this, but you also don’t have to pay them as they are not available for work. We would suggest you try and be as flexible as possible – perhaps you could alter their working hours or allow them to work remotely. This ensures they remain working and therefore supporting your business and their eligibility to be paid. If you can afford to pay them annual leave then this may be another option or allowing them a period of unpaid leave. If they are off because one of their children has symptoms and therefore they are self-isolating, the SSP rules above would apply.

Q – How do I make staff redundant?

A – There is a process that you should follow and this would need some planning, but, if there comes a point where you need to make staff redundant to remain economically stable then this is something you’ll need to do. There are different factors when looking at redundancy such as the level of pay, your financial liabilities, the process, how many people are affected and therefore we recommend you contact us so we can assess your individual circumstances and provide tailored advice.

Q – Can I just reduce hours?

A – It depends on whether you have the contractual right, but either way, you should discuss this with your employees and in some cases, you’ll need to reach agreement or look at the alternatives.

During this very challenging time, we would like to offer you some free support with your people and employment queries. If you feel you would benefit from a brief review of your employment contracts or a quick chat with somebody who can help you navigate your way through it all, then please get in touch – hrmailbox@nicholsonsca.co.uk

This guidance was issued 19th March 2020.

All the best,

The Nicholsons People Team

Lucy Pitfield – 07780 637999

Laura Reilly – 07559 905540

 


Time off for dependants

You are entitled to take a reasonable (see below) amount of unpaid time off to take action in relation to unforeseen events involving a dependant, defined as follows:

  • spouse/civil partner
  • child
  • parent
  • person who lives in the same household but is not a tenant, lodger, boarder or employee
  • those who reasonably rely on you for the provision of care or for assistance if they fall ill. This could be, for example, an elderly neighbour.

It is not possible to define what a reasonable amount of time is because this will depend on the specific circumstances in question. The same event may require varying amounts of time off for different people, or even the same person if it happens more than once on different occasions.