Q& A: Coronavirus job retention scheme (including guidance changes of 15th April 2020).
Updated: Aug 6
The following is for information only and does not replace the need for specialist legal advice in specific cases.
Government advice is being continually updated and there remain many unanswered questions.
It is our intention to continually update this guidance as required
The portal for making claims, under the scheme, is set to go live on 20th April.
What period does the scheme cover? Initially the scheme was to run from March 1st to May 31st 2020, but has now been extended to 30th June 2020.
Who can claim? Any business entity which has started a PAYE payroll scheme on or before 19th March 2020 and has enrolled for PAYE online, and which holds a UK bank account.
Individuals can furlough employees such as nannies provided that they pay them through PAYE and sent HMRC an RTI submission notifying a payment in respect of the employee on or before19th March 2020.
What happens if a company is in administration? Administrators where a company is being taken under the management of an administrator, can furlough employees but HMRC would expect them only to access the scheme if there is a reasonable prospect of rehiring those workers, for example, as a result of administration and pursuit of a sale of the business.
Can an employer claim for anyone who is not an employee The following individuals, who are not employees, can be furloughed, provided that they are paid PAYE.
(A) OFFICE HOLDERS The furlough, and any ongoing furlough , needs to be agreed between the office holder and the party who operates PAYE on the income they receive for holding their office. If the office holder is a company director or a member of a Limited Liability Partnership 9LLP), the furlough arrangements should be adopted formally as a decision of the company or LLP.
(B) COMPANY DIRECTOR 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 individual salaried directors, the board can decide that such directors should be furloughed.
A decision to furlough, so made, should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned.
Where furloughed directors need to carry out particular duties to fulfil the statutory obligations they owe to their company, they may do so provided that they do no more than would reasonably be judged necessary or that purpose.
This also applies to salaried individuals who are directors of their own personal service company (PSC).
(C) SALARIED MEMBERS OF LIMITED LIABILITY PARTNERSHIPS(LLPS)
Members of LLPS who are designated as employees for tax purposes are eligible to be furloughed and receive support through this scheme.
There are specific points to consider which are listed on the Gov.UK website.
Where agency workers are paid through PAYE, they are eligible to be furloughed and receive support through this scheme, including where they are employed by umbrella companies.
Furlough should be agreed between the agency, as the deemed employer, and the worker, though it would be advisable to discuss the need to furlough with any end clients involved.
The agency worker must not provide any service to , or generate income, for the agency, whilst on furlough.
Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company to agree whether to furlough the worker or not.
(E)LIMB (B) WORKERS are eligible where they are paid PAYE.
(F) CONTINGENT WORKERS IN THE PUBLIC SECTOR See cabinet office guidance.
(G) CONTRACTORS WITH PUBLIC SECTOR ENGAGEMENTS IN SCOPE OF IR35 OFF-PAYROLL WORKING RULES (IR35) See GOV.UK guidance.
Who can employees claim for?
Furloughed employees , on any type of employment contract, who are on their PAYE payroll on or before 19th March 2020 and which were notified to HMRC on an RTI submission on or before 19th March 2020..This includes those who are shielding , those who have caring responsibilities and foreign nationals. (This is because grants under the scheme are not counted as “access to public funds” and employees on all categories of visa can be furloughed.
Apprentices. However, they must be paid at least the Apprenticeship Minimum Wage/ National Living wage/ National Minimum Wage as appropriate for all the time they spend training. This means that an employer must cover any shortfall between the amount they can claim for the wages through this scheme and their appropriate minimum wage.
What is the position with public sector organisations?
They are not expected to use the scheme as most continue to provide essential public services or contribute to the response to the coronavirus outbreak.
What happens to employees who are long term sick?
If employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive statutory sick pay and would be classified as a furloughed employee.
What can employees do whilst on furlough?
When on furlough, an employee cannot undertake work for, or on behalf, of the organisation or a linked or associated organisation. This includes providing services or generating income. (Employers are free to allocate any critical business tasks to staff that are not furloughed.
An employee can take part in volunteer work, if it does not provide services to or generate revenue for or on behalf of the employer or a linked or associated organisation.
Furloughed employees can engage in training , as long as in undertaking that training,the employee does not provide services to, or generate revenue for, or on behalf of their organisation.
Can an employer take back employees made redundant? Employees that were employed as of 28th February 2020 and on payroll(i.e. notified to HMRC on an RTI submission on or before 28th February) and were made redundant or stopped working for the employer after that and prior to 19th March 2020, can also qualify for the scheme if the employer reemploys them and puts them on furlough.
If an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer , their former employer/s should not reemploy them, put them on furlough and claim for their wages through the scheme.
Who are not covered by the scheme?
Employees working reduced hours, because they are still generating income for the employer.
Employees on continuing unpaid leave which started before 28th February 2020. They cannot be furloughed until the date it was agreed that they would return from unpaid leave.
(However, if an employee started unpaid leave after 28th February 2020 then they can be put on furlough instead.)
Those on short term sick leave, or self isolating are able to get statutory sick pay whilst they are on sick leave or self isolating. The scheme is not intended to cover short term illness. After that they can be furloughed.
However, if employers want to furlough employees for business reasons and they are currently off sick, they are eligible to do so, as with other employees. In these cases, the employee should no longer receive statutory sick pay and would be classified as a furloughed employee.
A claim for statutory sick pay and a claim under this scheme cannot be made at the same period of time for the same employee.
What happens if the employee is on maternity lave, adoption leave, paternity leave or shared parental leave?
The usual rules apply but the employer can claim through this scheme for enhanced,(earnings related) contractual pay for employees who qualify for either maternity pay, adoption pay, paternity pay or shared parental leave.
What happens if an employee becomes sick whilst furloughed?
A furloughed employee who becomes ill, whilst furloughed, retains the statutory right to sick pay. This means that furloughed employees who become ill must be paid at least statutory sick pay. It is up to employers to decide whether to move those employees onto statutory sick pay or to keep them on furlough, at their furloughed rate.
Employees with more than one employer can be furloughed for each job
How is the agreement to furlough the employee evidenced?
The employer must confirm in writing, to their employee, that they have been furloughed. A copy of that communication must be kept for five years. It is highly advisable for employers to discuss the intention to furlough with staff and to make any changes, to their contractual terms, by agreement.
Employers need to be aware that general employment law still applies to any decision as to , and whom, to furlough. This includes equality and discrimination laws.
What can the employer claim for?
80% of the employees wage , as of 19th March 2020, before tax,up to a maximum of £2500, together with minimum automatic enrolment employer pension contributions, and employer national insurance contributions, on the subsidised furlough wage from the date that the employee actually starts furlough.
The employer can also claim for ” any regular payments they are obliged to pay their employees.” This is defined as including “wages, past overtime, fees and compulsory commission payments.”
What can the employer not claim for? “discretionary bonus ( including tips) and commission payments and non-cash payments.”
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 employees taxable pay.
NB. All the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.
Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the job retention scheme.
What happens to employees returning from statutory leave after the 28th February 2020?
Their furlough wage should be calculated against their salary, before tax, not the pay they received while on statutory leave.
Can the employer top up the furlough wage?
An employer is free to top up the furlough wage but cannot claim anything for additional National Insurance , and pension contributions, on the wages the employer is topping up, and the employee still must not do any fee generating work, or provide a service, to the employer.
What happens to employees transferred under TUPE and on a change in ownership? A new employer is eligible to claim under this scheme in respect of the employees of a previous business transferred after 19th March 2020 if either the TUPE or PAYE business succession rules apply to the change in ownership
What happens to employees whose pay varies? If the employee has been employed for 12 months or more then the employer can claim the highest of either the same months earnings from the previous year or the average monthly earnings for the 2019-2020 tax year.
If the employee has been employed less than 12 months then an employer can claim for 80% of their average monthly earnings since they started work.
What is the minimum furlough period?
Three consecutive weeks. Employees can be furloughed multiple times , but each separate instance must be for a minimum period of three consecutive weeks.
Can an employee work for another employer whilst placed on furlough?
Yes, if their contract of employment allows them to do so.
For tailored and specific legal advice, covering your individual circumstances, please contact us on 07803727534 or, alternatively, email Sundeep.firstname.lastname@example.org.
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