On Friday 20 March 2020 the government announced the introduction of a temporary scheme, the Coronavirus Job Retention Scheme, to support employers whose businesses have been severely affected by coronavirus.
The scheme will be open to all UK employers for at least four months starting from 1 March 2020. Employers are able to use a HMRC portal (open as of 20 April) to claim 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2500 a month, plus (not including) the associated employer national insurance contributions and minimum automatic enrolment employer pension contributions on that wage.
The scheme is designed to help employers that cannot maintain their current workforce because their operations have been severely affected by Covid-19. The government has stated that all types of employers can claim under the scheme as it recognises that different businesses will face different impacts from Covid-19. This is slightly different from the original purpose of the scheme, which was for employers to claim pay for employees who would otherwise have to lay off or make employees redundant. This updated guidance suggests that all employers are eligible to claim under the scheme provided their business operations have been severely impacted by Covid-19.
Employees on furlough leave will remain at home on 80% of their pay (subject to a maximum of £2,500 per month) and they will not be permitted to carry-out any work. To be eligible for the grant, when on furlough, an employee cannot undertake work for, or on behalf, of the organisation or any linked or associated organisation (e.g. any company in the employer’s group). This includes providing services or generating revenue.
On 26 March, the government published guidance on the Coronavirus Job Retention Scheme which answers a number of questions which had arisen since the scheme was introduced. This guidance has been subsequently updated five times (at the time of writing, the last update was on 20 April). Other guidance for businesses and employees has also been updated: support for businesses through the Coronavirus Job Retention Scheme and - Furloughed workers.
Some key points of the scheme are:
- The HMRC portal set up in order to submit a claim to the scheme is now up and running.
- The scheme is open to all UK employers that had a PAYE scheme in place on or before 19 March 2020.
- Any organisation with employees can apply including private companies, charities, recruitment agencies and public authorities.
- Employers can reclaim up to 80% of wage costs up to a cap of £2500 per month, plus the associated employer NICs and minimum auto enrolment pension contributions on that wage.
- An employer can choose to top up to 100% but does not have to.
- For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earnings from the previous year (e.g. April 2019); or (ii) average monthly earnings in the 2019-20 tax year.
- Employees must have been on payroll on or before 19 March 2020 to be eligible to be claimed for under the scheme. There must also have been an RTI (Real Time Information) submission made to HMRC on or before 19 March for any employee claimed for.
- Furlough leave must be taken in minimum blocks of 3 weeks. Employees can be furloughed multiple times provided it is for at least 3 weeks each time and within the current 4 month period that the scheme is currently due to run for. This means that employers can rotate staff on furlough.
- The employee must not be working for the employer at all during furlough leave. However, they are able to undertake training and do volunteer work, provided they don’t provide services or make any money for their employer. The employee can also work for and be paid by another employer so long as this is permitted in the contract of employment with the first employer.
- Employees on sick pay or self-isolating can be furloughed if the employer so wishes for business reasons. In this case, the employee should no longer receive sick pay and would be instead be classified as a furlough employee. Employers are also entitled to furlough employees who are being shielded or off on long-term sick leave. It is up to employers to decide whether to furlough these employees.
- Employers can only claim once every 3 weeks and claims can be backdated to 1 March 2020. Currently, the scheme is due to end on 30 June 2020.
- Employees that were made redundant after 28 February can be re-employed by the employer and then placed on furlough even if this does not happen until after 19 March 2020. This applies as long as the employee was on the employer payroll as at 28 February and had been notified to HMRC on an RTI submission on or before 28 February 2020. The employer is under no obligation to re-employ the employee and has discretion to refuse to do so.
- Office Holders (e.g. statutory directors) can be furloughed. Whilst furloughed, directors can only perform essential statutory duties, as set out by the Companies Act 2006 (Directors Duties) and must not act in a way that could generate revenue for the employer. It is thought that the activities of furloughed directors should be limited to the filing of the company’s annual returns or accounts to Companies House.
- Holidays accrue and can be taken during furlough leave, according to the government guidance for employees. The rate of holiday pay during furlough is a complex issue and employers should take specific legal advice on this.
Further guidance on the mechanics of claiming payment under the scheme can be found in the following link as well as more detailed information:
If you have any questions with regards to furlough please contact MBM’s employment team on email@example.com