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Furlough and job retention scheme – further clarification from the government

The Government has updated its guidance on the job retention scheme again and provided some further clarity. We have updated our FAQs based on this further guidance.

Does this scheme apply to small employers?

It applies to all UK employers, irrespective of size. The employer must have created and started a PAYE payroll scheme on or before 28th February 2020, enrolled for PAYE online (this can take up to 10 days) and have a UK bank account.

What does “Furlough” mean?

The definition of “furlough” is to allow or force someone to be absent temporarily from work. The recent guidance has stated “employees on leave of absence.”

When does this scheme start?

The scheme is backdated to 1 March 2020 and will last for three months, i.e. end of May and may be extended if necessary.

Who is eligible?

Employees and workers subject to PAYE and who were in employment on 28th February 2020. Employees who commenced work after 28th February 2020 cannot claim under this scheme.

Employees can be on any type of employment contract, including full time, part time, agency, flexible, zero hours and fixed term.

As well as employees, and provided that they are paid via PAYE the following are eligible to be furloughed: office holders, salaried members of limited liability partnerships and agency workers (including those employed by umbrella companies).

If an employee was made redundant, or they stopped working for you on or after 28th February 2020, you can re-employ them, put them on furlough and claim their wages through the scheme.

How much will be paid?

The Government has confirmed that HMRC will provide a grant to cover the lower of 80% of an employee’s regular wage or £2,500 per month plus the associated Employer National Insurance contributions and minimum auto enrolment employer pension contribution on the subsidised wage. It has been clarified that the employer can reclaim 80% of compulsory commission from HMRC as well as basic salary but does not include non-monetary benefits.

How do I calculate costs where the employee’s pay is a variable?

If the employee has been employed for more than 12 months, then it is the higher of:

  • The same month’s earnings from the previous year
  • The average monthly earnings since they started work.

If it is less than 12 months, then it will be the average of their monthly earnings since they started work.

What about the national minimum wage (NMW) / national living wage (NLW)

 Workers are entitled to the NMW and NLW for the hours that they are working. Accordingly, furloughed workers must be paid the lower of 80% of their salary, or £2,500 even if this falls below the NLW / NMW.

Can I simply write to the employee and tell them that they are on furlough?

No – this amounts to a variation of the terms and conditions of employment and therefore you will need to seek agreement with the employees. You should be mindful not to discriminate when selecting which staff you should offer furlough to. You should document the outcome of your discussions and ensure you keep a record of it, as it may be required for audit purposes.

The government’s guidance has specifically stated that to be eligible for the grant employers must confirm in writing to their employee that they have been furloughed. A record of this communication must be kept for five years.

What about employees that are on Statutory sick pay (SSP)?

Employees who are on sick leave (or self-isolating) should continue to receive SSP but can be furloughed if they are well enough to return to work.

What about employees that are shielding? 

Employees that are shielding in line with public health guidance, or need to stay at home with someone who is shielding, and if they are unable to work from home and you would otherwise have to make them redundant, can be furloughed.  You should ensure that you obtain evidence that the employee has been advised to shield as you may need this for audit purposes. You should think about updating your privacy policy to ensure that you are able to process this information.

Does the employer have to make up the additional 20%?

No – this is entirely at the employer’s discretion

Can the employer place an employee on furlough if they are working reduced hours?

No – the government’s guidance is clear on this. Although it is not clear from the government’s guidance, if an employer finds that there is no work for the employee/worker then it should re-instate the employee to the contractual hours and salary and then place on furlough.

Can employees work whilst being furloughed?

No. In order for the employees to be eligible, an employee cannot undertake work for or on behalf the organisation. An employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of the employer. If workers are required to complete online training courses whilst on furlough then they must be paid at least the national minimum wage.

Is the portal open yet?

No – HMRC is working on this. However, to make a claim, employers will need:

  • The ePAYE reference number
  • The number of employees being furloughed
  • The claim period (start and end dated)
  • Amount claimed
  • Bank account number and sort code
  • Contact name
  • Phone number.

The employer will need to calculate the amount claimed, although HMRC will retain the right to retrospectively audit all aspects of the claim. The employer should make the claim using the amounts in the payroll either shortly before or during running payroll. Claims can be back dated until 1 March, where employees have already been furloughed.

When will the Company receive payment after making the application?

The Government hopes to process the grants by the end of April, and will make payments via BACS payment into a UK bank account. Once the claim has been made, HMRC will check the claim and if eligible will make the payment via BACS.  The government has said that HMRC will process all claims before the scheme ends.

If a business needs short term cash flow support, it may be eligible for a Coronavirus Business Interruption Loan.

Further updates will be published as and when further information becomes available. If in the meantime, you have any questions then please contact Sejal.Raja@rlb-law.com

 


Disclaimer

This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.

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