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Coronavirus Job Retention Scheme Updated Q&As

On Saturday 4 April 2020 HMRC published its updated guidance on the Coronavirus Job Retention Scheme and we have updated our Q&As accordingly. The guidance confirms various issues such as what contractual payments employers can claim. Yet the guidance is still unhelpfully silent on the issue of holidays including how employers should treat bank holidays. For specific advice for your organisation please contact Simon Quantrill or Katherine Sheerin.

Coronavirus Job Retention Scheme | Includes Updated HMRC Guidance Published on Saturday 4 April 2020

The scheme introduces the concept of furlough leave and is designed to pay a grant to employers of 80% of employees’ pay with the objective of avoiding unpaid lay-offs or redundancies. The latest HMRC guidance states the scheme “is designed to help employers whose operations have been severely affected by coronavirus (COVID-19) to retain their employees and protect the UK economy. However, all employers are eligible to claim under the scheme and the government recognises different businesses will face different impacts from coronavirus.” We have updated our Q&As to cover the updated HMRC guidance and we explain how this temporary scheme will work. We also discuss the continuing and unhelpful confusion and lack of guidance about how holiday/annual leave works for furloughed employees.

On 20 March 2020 Government announced that all employers regardless of size or sector, could apply for a grant from HMRC to cover 80% of the wages of its employees subject to a cap of £2,500 per employee per month, provided they keep the worker employed. In addition employers can claim the associated employer national insurance contributions and employer auto-enrolment pension contributions.

Claims can be backdated until 1 March where employees have already been furloughed.

The scheme will last at least for three months but will be extended if necessary. The objective of the scheme is to help employers avoid having to lay-off staff on no pay or make them redundant.

Latest HMCR guidance now states that, “Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.”

Yes, the scheme is open to all employers with a PAYE scheme regardless of size, sector including the public sector, local authorities and charities. Public sector employers are not expected to use the scheme whilst central Government continues to fund salaries etc. Non-public sector organisations who receive funds to provide public services are also expected not to furlough their staff.

The scheme covers employees and workers provided they were on the employer’s PAYE payroll on 28 February 2020 and includes full-time, part-time and flexible and zero hours employees and PAYE workers. Apprentices can be furloughed but they can continue to train whilst furloughed – but they must be paid the NMW or NLW for all time spent training.

 

 

Updated Government guidance published on 5 April 2020 now states that employers need to designate affected employees as ‘furloughed workers’ and confirm this in writing and this record must be kept for five years. Furlough means in effect employees are on a leave of absence from work. Employees who go onto furlough leave must stay at home and must not do any work for the employer who has furloughed them. Employers must have set up and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

The minimum period is three consecutive weeks during which time furloughed employees must stay at home and do no work at all for their employer. Currently there is confusion about whether employees who take holiday whilst on furlough leave break this three week rule (see holiday questions for more details).

You do not need to place all your employees on furlough.

Employees can be furloughed multiple times, but each separate instance must be for a minimum period of three consecutive weeks.

The short answer is in most cases no. This is because you still have to make sure you don’t end up with a breach of employment contract or unlawful deductions of wages claim. You need to get the consent of every employee you want to put onto furlough leave. This is best done by consulting with your employees and getting them to sign a letter confirming their consent to the change in status. In practice almost all employees are going to cooperate given the alternative is likely to be unpaid lay-off or redundancy.

We now have extensive experience of drafting bespoke furlough agreement letters for employers that take into account their specific arrangements and furlough rules. Please contact Simon Quantrill at [email protected] if you would like help implementing furlough leave for your organisation.

Yes, workers who you pay via your UK PAYE payroll are covered but they must have been on the your PAYE payroll on 28 February 2020. Such workers are often described as PAYE Workers.

The scheme is being back dated to 1 March 2020. Latest HMCR guidance now states that, “Claims should be started from the date that the employee finishes work and starts furlough, not when the decision is made, or when they written to confirming their furloughed status.”

The scheme also covers employees who have already been made redundant but who are re-employed/re-hired. They can then be put onto furlough leave and the employer will qualify for the grant.

Employees hired after 28 February 2020 cannot be furloughed or claimed for under the scheme.

HMRC’s new guidance published on Saturday 5 April 2020 now states:

“As well as employees, 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, agency workers (including those employed under umbrella companies [and] limb (b) workers. The updated guidance incluses specific considerations for each type of individuals who are paid via PAYE but who are not necessarily employees in employment law.”

The scheme provides a maximum grant (not a loan) per employee and is the lower of 80% of wages or £2,500. Wages is defined as “all employment costs up to a cap of £2,500 per month”. In addition you can claim for employer’s national insurance contributions and auto-enrolment pension contributions based on the reduced pay.

Normal PAYE deductions must be made from the payments to employees. Fees, commissions and bonuses are not included. Government is going to issue more guidance on how employers should calculate their claims for employer’s national insurance contributions and minimum auto-enrolment employer pension contributions.

The latest HMRC guidance published on Saturday 4 April 2020 now confirms that:

“You can claim for any regular payments you are obliged to pay your employers. 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.”

Therefore it seems that contractual commission payments can be claimed based on past sales or work – there can’t be any claims based on future sales etc because the employee will be furloughed and not allowed to perform any work. This new definition appears to also include claims for contractual car allowances on the basis it will be a regular payment paid to an employee.

No, not necessarily. In most cases employees will need to agree that whilst on furlough leave they will be paid only under the scheme. If they don’t agree technically there could be a breach of contract and an unlawful deduction of wages. As noted above, in reality almost all employees will agree as this will be the least worst option.

No, furloughed employees must not do any work. However, they can do volunteer work or training as long as it does not provide services to or generate revenue for or on behalf of the employer’s organisation.

If contractually allowed, a furloughed employee can take up other paid work.

Yes, whilst on furlough leave, holiday entitlement will continue to accrue as normal.

No, they are not covered under the scheme. Only employees who are on the employer’s PAYE on or before 28 February 2020 can be furloughed under the scheme.

Yes, employees can still be dismissed for redundancy while on furlough leave or immediately after it ends. There is no need for the employee to return to work. However, in both cases normal redundancy consultation and dismissal procedures must still be followed.

The latest HMRC guidance published on Saturday 4 April 2020 for employers on the Coronavirus (COVID-19) Job Retention Scheme is from here.

In addition the new Government Coronavirus Business Support website includes updated information plus other wider business support information, advice and guidance.

Workers are only entitled to both for the hours they are working. Therefore, furloughed workers, who are not working, must be paid the lower of 80% of their salary, or £2,500, even if, based on their usual working hours, this would be them below the NLW/NMW pay levels.

However, if furloughed workers are required to complete online training courses then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be covered under the scheme.

Yes, we can provide you with a bespoke agreement to make sure you correctly furlough your affected employees. Please contact Simon Quantrill He will be pleased to discuss your requirements.

This is the most frequent question we are being asked this week and at this time there is no clear answer. The latest HMRC guidance published on Saturday 4 April 2020 was unhelpfully silent about holidays.

The unknown interplay between furlough leave and holiday is causing employers difficulties and will become more of a problem if furlough leave extends beyond the initial three months.  We all need further guidance from Government. The law about holiday entitlement is at the best of times not easy and more so now with limited guidance on how it should work for furloughed employees.

We do know, however, that the 5.6 weeks’ annual leave entitlement under the Working Time Regulations will continue to accrue during furlough leave, but that’s as far as the guidance goes. We do need clarification. Employers do want to know what options they have as part of deciding what is best for their businesses and their employees.

As an employee would I want to take any paid holiday whilst on furlough leave? Probably not. I would be sitting at home with no where to go and being paid albeit at a reduced rate. Why would the employee want to use accrued holiday entitlement to sit at home with not much more pay? Hardly a holiday for most people. Hardly the health and safety measure intended under the Working Time Regulations. That said some employees may see taking accrued holiday as a means to top up their pay. This is because in most cases holiday pay has to be paid at the employee’s full rate of pay.

As an employer why would you want to encourage employees to take holiday whilst furloughed? You may want to minimise the amount of accrued holiday that will be left after furlough leave ends or you too might see taking holiday as a means of topping up pay to 100%. Other employers may want to restrict employees taking holiday to avoid paying holiday pay which may be a cost best avoided at this time and which may not be recoverable from HMRC.

With three bank holidays coming up, is it possible for employers to pay these at full pay? Should employers pay? This is another good reason for urgent further guidance.

Yet, employers must be cautious about this issue because to qualify for furlough leave it must last for a minimum of three weeks. The issue being would taking holiday break furlough leave and result in a loss of grant towards wages? We don’t really know. Employers are right to worry that holiday may not be treated as furlough leave with the result the pay may not be recoverable from HMRC under the scheme.

Without further guidance it is hard for employers to decide also if they should be looking at negotiating any changes to their contractual holiday terms with employees. For example, so that any annual leave over and above statutory leave does not accrue during furlough leave. That said, this may not be a welcome suggestion from the employee’s perspective, but it may be a necessary cost cutting move for the employer.

For some employers they may decide it is best for them if they instruct their furloughed employees to take all or some of their accrued holiday whilst on furlough leave. This approach assumes (or takes the risk) that holiday pay has not been expressly excluded from what can be claimed so it is logical that it can be reclaimed as part of “normal wages”. But again we don’t really know the answer,

Should you suspend holidays during furlough leave?

Until Government publishes further guidance, we are recommending to employers that the safest option is to suspend the right to take annual leave for furloughed employees to make sure there is no risk that it will break the minimum three week period. At this stage, you need to see furlough leave as a type of leave of absence from work, rather like a sabbatical. This approach will also stop an employee from giving notice to take statutory holiday during furlough leave.

Whatever you decide about how to treat holidays, you should cover your approach in your furlough agreement letter.

New emergency rules have come into force that ease the Working Time Regulation restrictions that prevent carry over of the four weeks’ annual leave entitlement from one holiday year to another.

The Working Time (Coronavirus) Amendment Regulations 2020 amend regulation 13 of the Working Time Regulations 1998 to allow the carry-over of any untaken four weeks’ leave where it was not reasonably practicable to take it in the leave year as a result of the effects of the coronavirus (including on the worker, the employer or the wider economy or society).

It is now possible for furloughed and other employees and PAYE workers to carry forward untaken holiday for two years.

As a result of this change, employers may feel less concerned about a bank of accrued holiday building up this year to be used in the current holiday year if and when life returns somewhere near normal.

Employers will need to decide if all holiday entitlement can be carried forward, including contractual entitlement in excess of statutory weeks.

No, employees who are on sick leave cannot be furloughed until they are fit and able to return to work. This rule applies whether the employee is being paid statutory or contractual occupational sick pay.

Yes subject to latest HMRC guidance which states: “Employers can claim for furloughed employees who are shielding in line with public health guidance (or who need to stay at home with someone who is shielding) if they are unable to work from home and you would otherwise have to make them redundant.”

It should be noted that this guidance appears narrower than the general statement about when employees can be furloughed.

Expert, pragmatic and affordable advice

Providing you with help worth having - for you and us it's personal.

Simon Quantrill, Principal Solicitor

Contact me on

01473 688 100

Expert, pragmatic and affordable advice

Providing you with help worth having - for you and us it's personal.

Simon Quantrill, Principal Solicitor

Contact me on

01473 688 100

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