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COVID-19 – Employer Q&As

Coronavirus Job Retention Scheme Q&A

Q             What is the purpose of the Scheme?

The purpose of the Scheme is to provide for payments to be made to employers in respect of employees who have been furloughed because of circumstances arising as a result of coronavirus.

Q             Who is the Scheme open to?

The Scheme is open to all employers that had a PAYE payroll scheme registered on HMRC’s real time information system (“RTI”) for PAYE on or before 19 March 2020. This includes businesses, charities, recruitment agencies (engaging agency workers), public authorities and individuals hiring nannies.

Q             Does the Scheme apply to all staff?

Furloughed employees must have been on your PAYE payroll on or before 19 March 2020, and can be on any type of contract, including:

·         Full-time employees

·         Part-time employees

·         Employees on agency contracts

·         Employees on flexible or zero hours contracts

The Scheme is only available to employees who will not be doing any work for you. It is essentially an alternative to redundancy – and will therefore not apply to employees who agree to shortened hours or a reduction in pay.

The  Scheme is also open to the following groups if they are paid via PAYE although specific rules apply to each category individually:

·         Office holders (including directors)

·         Salaried members of LLPs

·         Agency workers

·         Limb (b) workers

Q             Can I furlough employees who recently transferred to my business under TUPE?

Yes – a new employer is eligible to claim under the Scheme in respect of the employees of a previous business who transferred after 28th February 2020 if either TUPE or the PAYE business succession rules apply to the change in ownership.

Q             Can employees who are self-isolating or on sick leave be furloughed?

The answer is unclear as the online guidance and the Treasury Direction conflict with one another.  According to current online guidance (as at the time of writing) staff who are off sick or self isolating can be furloughed providing that their sickness or self isolation is not taken into account when reaching the decision to furlough them (i.e. they would have been furloughed even if they were not sick or isolating). However, the Treasury Direction, which is the legal instrument which created the Scheme says that staff who are receiving Statutory Sick Pay cannot be furloughed until their Statutory Sick Pay ends. This may be an unintended consequence of the Direction given that the guidance was last updated after the Direction was published.

Q             Can I furlough an employee on maternity leave?

Yes – however the normal rules for maternity leave and pay continue to apply (as with other forms of parental leave). Your claim through the Scheme will be limited to enhanced contractual maternity pay.

However, the wording of the Direction implies that an employee’s wages are only recoverable if the employee is receiving the maximum permitted (i.e. the lower of 80% of applicable wages or £2,500, less any Statutory Maternity Pay being paid to the employee). Whilst perhaps not what was intended, this could mean that where contractual maternity pay is less than 80% of salary (or £2,500 per month) it cannot be recovered from HMRC.

Q             What happens if an employee becomes sick while furloughed?

Furloughed employees who become ill must be paid at least Statutory Sick Pay (‘SSP’). It is up to employers to decide whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate (or at a topped up rate if they are entitled to company sick pay).

If a furloughed employee who becomes sick is moved onto SSP, you will not be able to claim for the furloughed salary as employers are required to pay SSP themselves. You may however qualify for a rebate for up to 2 weeks of SSP. If you were to keep the sick furloughed employee on the furloughed rate, you remain eligible to claim for these costs through the Scheme.

Q             What if an employee is shielding or has caring responsibilities? Can they be furloughed?

Yes – employees who are shielding in line with public health guidance or who need to stay at home with someone who is shielding can be furloughed if they are unable to work from home. Similarly, employees who are unable to work because they have caring responsibilities (such as looking after children) can also be furloughed. However, you should be careful not to select employees on the basis that they have caring responsibilities as this could potentially lead to claims of discrimination.

Q             How much pay does a furloughed employee receive?

HMRC will reimburse 80% of furloughed employees’ regular wages up to a cap of £2,500 per month plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage (3%).

Q             What can we claim for an employee who has varying pay?

If the employee has been employed (or engaged by an employment business) for the entirety of the 2019 to 2020 tax year, you can claim for the higher of either:

  • the same month’s earning from the previous year
  • average monthly earnings from the 2019-20 tax year

Up to a maximum of £2,500 per month.

If the employee started work after 6 April 2019, you can claim for an average of their monthly earnings since they started work. If the employee does not have a full month’s earnings for the period leading up to them being furloughed you should base your claim on a pro-rated amount of their earnings so far.

Q             Does the Scheme relate to basic pay or overtime and bonuses?

The grant will cover the lower of 80% of an employee’s regular wage or £2,500 per month. HMRC has now confirmed that this will include any regular payments you are obliged to pay your employees such as regular wages, non discretionary payments for hours worked and non discretionary overtime. The Direction states that you cannot claim for any salary or payment which is ‘conditional on any matter’ which, if taken literally could encompass almost any payment made to an employee. However,  the guidance explains that excluded payments will include tips, discretionary bonuses and discretionary commission.

Non-monetary benefits provided to employees, including taxable benefits in kind are not covered. Similarly, benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should not be included.

If you wish to provide these benefits to your furloughed this should be in addition to the wages that must be paid under the terms of the Scheme.

Q             If the Government is paying 80% does the employer have to pay the rest?

There is no obligation on employers to make up the shortfall – BUT – you cannot unilaterally vary employees’ employment contracts and reduce pay.  If you plan to top up the employee’s salary and benefits to their normal levels there is unlikely to be a problem but if not then you need to consider how you will legally achieve the reduction.  In most circumstances you will need to negotiate any reduction to salary or benefits with employees / any applicable Trade Union and obtain agreement. Such agreement may be forthcoming where the only realistic alternative to agreeing to a reduction is redundancy.

Q             Who pays the employees?

You do as their employer. You can apply for the grant in anticipation of an imminent payroll run.

Q             What if there is insufficient cash flow to pay employees?

You will need to consider whether you are eligible for a Coronavirus Business Interruption Loan or making an application in advance of your payroll run (as is permitted).

Q             Is there a maximum total amount of reimbursement that employers can apply for?

No.  There is to be no limit on the amount of funding available to an employer applying the scheme to qualifying furloughed employees.

Q             One of my furloughed employees has asked me if they can start working elsewhere – does this mean they are no longer eligible for the Scheme? 

No.  An employee is entitled to work elsewhere (other than for an organisation linked to their employer) whilst they are furloughed providing this is not prohibited by their employment contract.

Q             How long can an employee remain furloughed and how often can I make a claim in relation to their pay?

The Scheme will be open until the end of October 2020, though from August 2020 employers will be expected to contribute an amount towards the wages of furloughed employees. Further details are expected by the end of May 2020. An employee may remain furloughed for the duration of the Scheme or for a shorter period. However, in order for you to be able to make a claim in relation to an employee they must remain furloughed for a minimum period of 3 weeks. You can decide the claim period taking into consideration how frequently you run payroll. You cannot make more than one claim during a claim period.

Q             We require a skeleton staff to maintain our business during this period, are we able to rotate staff onto the Scheme?

Yes employees can be furloughed multiple times but each separate instance must be for a minimum period of 3 consecutive weeks. When they return to work they must be taken off furlough. Current indications are that this position will change from August 2020 and employees will be able to return to work part time whilst being furloughed part time. Further details are expected by the end of May 2020.

Q             If we agree to furlough the employees at this stage does that mean we will not be able to make them redundant at a later time?

No.  The only stipulation is that the employee must be furloughed for a minimum period of 3 weeks. You would of course need to ensure that your decision to make the employee(s) redundant at that stage is a reasonable one as in the event the employee issued a claim for unfair dismissal. You would also need to ensure that a fair process is followed and that any collective consultation requirements are adhered to (see below).

Q             Does the furloughed employee’s employment terminate automatically once the Scheme ends?

No.  When the government ends the Scheme you will need to make a decision in relation to whether the employee can return to work. If the business still has a reduced need for the work undertaken by the employee it may be necessary for you to consider other methods of working such as reduced hours, part time furlough or a pay cut (subject to the employee’s agreement). If there are no reasonable alternatives you may need to consider making redundancies.

Q             Do employees continue to accrue holiday whilst furloughed?

Yes, holiday will continue to accrue though you can seek to agree with staff that they will only accrue statutory leave whilst furloughed (5.6 weeks’ per year).

Q             Can an employee take holiday during the furlough period?

Yes but the employee must be paid in full for any holiday taken during their furlough period. Employers will be able to claim the furlough grant for periods spent on holiday and employers are able to direct employees to take holiday during their furlough period (providing the minimum notice periods are observed).

If you have any questions in relation to the Scheme or would like assistance with preparing letters to your employees please let us know. We would be happy to assist.

Magrath Sheldrick LLP

Employment Team




The contents of this briefing are for information purposes only.  All circumstances are unique and the information and opinions expressed in this document do not constitute legal advice and should not be regarded as a substitute for legal advice. No liability is accepted for the opinions contained or for any errors or omissions.

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