Coronavirus Job Retention Scheme: How to approach furloughed workers

As the Government have now released further details of the mechanics of the coronavirus job retention scheme, we have summarised the position for employers who have furloughed workers or who are considering doing so.

Our view is that this scheme is beneficial for a wide range of organisations who are disrupted by the current COVID-19 crisis and we would recommend consideration of how it may help your business.

The scheme is open to all UK employers that had a PAYE scheme in place on 28 February 2020. This includes charities, recruitment agencies and public authorities; however, the government does not expect public sector employers to use it unless, in very specific circumstances, where funding is disrupted.

First published: 27/03/2020. Last amended: 15/04/2020

The mechanics

  • Furloughed workers MUST be placed on furlough i.e. temporarily not available for, or provided with, work. The scheme does not work for employees where hours have been reduced but they are still attending work. Employees can volunteer and undertake training during this time but must not provide services for the employer.
  • Employers can reclaim up to 80% of wage costs up to a cap of £2,500 per month, and in addition the associated employer NICs and minimum autoenrollment pension contributions on that wage.
  • Fees, commission, and bonuses are not included so employers must make this clear in their communications with furloughed workers.
  • The employer can choose to top up the wages paid to 100%, but does not have to.
  • For employees whose pay varies, the employer can claim for the higher of: 
    • the same month's earning from the previous year (eg earnings from March 2019); or
    • average monthly earnings in the 2019-20 tax year.
  • National Minimum Wage (NMW) does not apply during furlough because the employee is not working. Therefore, an employer can pay an employee 80% of their wage even if that takes them below NMW. Such employees may be able to access additional support through Universal Credit.
  • To be eligible, the employee must have been on the payroll on 19 March 2020. If they were hired after that date unfortunately they are not covered by the scheme.
  • The scheme only applies from the point at which workers were furloughed. If they were hired later, they are not eligible. Anybody who was on the payroll on 19 March and has since been made redundant or laid off can be rehired and put on the scheme. To do so, an employer would reinstate and give continuous service.
  • Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding and there is no provision which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks.
  • The government has recently confirmed that an executive director can furlough and continue with their statutory duties. However, it is important to note that a director on furlough leave would not be permitted to carry out any substantive work such as, for example, attending board meetings. It may be possible to argue that attending meetings that are required to exercise statutory duties would be permitted but this is currently a grey area and should be approached with caution. Please do contact a member of our team for advice specific to your circumstances.

Our advice

  • The process for agreeing furlough particularly where pay will not be topped up to 100% must be undertaken carefully and voluntary consent to furlough sought because the normal principles of employment law apply.
  • For larger scale furlough where the business is closed and it may be necessary to impose the change some form of collective consultation is strongly advisable. Where there is formal Trade union recognition in place it is likely that the provisions will be able to be agreed more rapidly than where employee reps need to be put in place.
  • Consider how to handle the difficult area of employees on sickpay or self-isolating. They cannot be furloughed, but can be furloughed afterwards, so a discussion may be needed with individual employees about how to handle this. Employees who are shielding can be placed on furlough.
  • Employees on maternity (or similar) leave can continue to draw SMP (or similar) payments. The guidance does not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed.
  • Employers can only claim once every three weeks, i.e. they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020 but only from the date that an employee was furloughed.
  • It is anticipated that the scheme will be up and running from the end of April and employers will need to cover payroll costs directly until that point unless the pay date is also contractually varied.

Update (7 April)

On Saturday 4 April 2020 the Government updated its guidance (for both employers and employees) on claiming through the Coronavirus Job Retention Scheme ('the CJRS').

We have summarised for you the key changes or clarifications below, which should be read in conjunction with our earlier guidance above.

If you'd like to get in touch with us, a coordinated team of experts are leading our support and can be contacted collectively using our dedicated inbox: [email protected].

What has changed?

There is a change in emphasis to make it clear that all employers are eligible to claim under the CJRS. Whilst the CJRS is designed to help employers whose operations have been severely affected by coronavirus – it seems there will be no ‘test’ applied or to be passed to be eligible to claim as an employer.

The guidance now makes it clear that apprentices can be furloughed – and continue to train whilst furloughed (provided they are paid at least National Minimum Wage for the time spent training).

The guidance confirms that new employees who were hired on or after 28 February 2020 cannot be furloughed and claimed for under the CJRS.

The guidance makes it even clearer that workers/employees of any kind can be furloughed so long as they were paid via your PAYE.

The CJRS can be used to cover those who were made redundant or left your employment for any other reason on or after 28 February. You can re-employ them and furlough them. This is much wider than the original guidance wording suggested (and more in line with the view that the CJRS is simply a benefits system being administered via employers).

A worker/employee cannot be on furlough leave and sick leave at the same time. If they are sick or self-isolating they are entitled to SSP but you can furlough them as soon as they are no longer receiving SSP. This seems to stem from a concern about an individual being in receipt of two benefits (SSP and the CJRS) – but seems nonsensical in practice.

If you have an employee already on SSP at the time they are furloughed, then fine, you will wait until the end of that period before furloughing them. But if they are on furlough leave already when they become unwell, it is difficult to see the motivation for employer or employee to get the sickness notification and classification to sickness/SSP actioned as the pay will drop substantially (and it could interrupt the 3-week minimum period of furlough).

One view is that the employee does not need to notify the employer if they are unwell whilst furloughed, since they are unable to undertake work for the furloughing employer so it is irrelevant if they are deemed incapable of work. But a furloughing employer will need to know about and bear sickness/self-isolation in mind if rotating employees between 3-week+ periods of furlough to spread the fairness of work and pay reductions.

The guidance makes it very plain that an employer can furlough:

  • Those who are shielding or need to stay at home with someone who is shielding “if they are unable to work from home and you would otherwise need to make them redundant” (although how they test that statement is unclear).
  • Those who have childcare/other caring responsibilities which mean they are unable to work.
  • Those on fixed term contracts – you can extend or renew their contracts whilst furloughed without breaching the CJRS.
  • Office holders, company directors including those who are directors of their own personal service companies (and these directors are still able to comply with statutory director obligations whilst furloughed), salaried members of LLPs, agency workers paid via PAYE and limb (b) workers (aka “gig economy personal service workers”).

Employees who already have two jobs can be furloughed from one or both. Employees who are furloughed from your employment are also able to go on and work elsewhere whilst furloughed so long as their contract of employment with you allows this (or, presumably employers can waive any/some outside interests clauses to allow this where you are happy for employees to do so).

Employers recruiting at present should ask applicants if they are currently furloughed from another role and fill out a specific starter checklist (Statement C) if they are.

You have to confirm furlough in writing to employees and keep this record for five years.

Overtime, fees, commission, bonuses or any other non-cash payments that you are contractually obliged to pay should be included in the reference salary. Discretionary bonuses, tips, commission payments and no-cash payments are excluded though.

Neither benefits in kind nor benefits provided via salary sacrifice schemes should be included in the reference salary. Benefits to which an employee is entitled will continue alongside wages paid under the CJRS.

The CJRS does not cover Apprenticeship Levy or Student Loan payments, both of which must continue to be paid as usual.

National Minimum Wage does not apply to furloughed workers (unless they spend any time training, in which case they should received NMW for that time – which is likely to be the case under the CJRS unless they were already paid close to NMW levels and need to undertake a substantial level of training).

Claims for CJRS can only be backdated to 1 March where employees were already furloughed (this can only really cover those who were made redundant and re-employed).

Employees can be furloughed rotationally and multiple times – so long as each period of furlough leave is at least 3 weeks long.

Employees on furlough leave remain entitled to redundancy payments (and the CJRS cannot be used as a substitute for redundancy payments).

There is a change in emphasis to make it clear that all employers are eligible to claim under the CJRS. Whilst the CJRS is designed to help employers whose operations have been severely affected by coronavirus – it seems there will be no ‘test’ applied or to be passed to be eligible to claim as an employer.

The guidance now makes it clear that apprentices can be furloughed – and continue to train whilst furloughed (provided they are paid at least National Minimum Wage for the time spent training).

The guidance confirms that new employees who were hired on or after 28 February 2020 cannot be furloughed and claimed for under the CJRS.

The guidance makes it even clearer that workers/employees of any kind can be furloughed so long as they were paid via your PAYE.

The CJRS can be used to cover those who were made redundant or left your employment for any other reason on or after 28 February. You can re-employ them and furlough them. This is much wider than the original guidance wording suggested (and more in line with the view that the CJRS is simply a benefits system being administered via employers).

A worker/employee cannot be on furlough leave and sick leave at the same time. If they are sick or self-isolating they are entitled to SSP but you can furlough them as soon as they are no longer receiving SSP. This seems to stem from a concern about an individual being in receipt of two benefits (SSP and the CJRS) – but seems nonsensical in practice.

If you have an employee already on SSP at the time they are furloughed, then fine, you will wait until the end of that period before furloughing them. But if they are on furlough leave already when they become unwell, it is difficult to see the motivation for employer or employee to get the sickness notification and classification to sickness/SSP actioned as the pay will drop substantially (and it could interrupt the 3-week minimum period of furlough).

One view is that the employee does not need to notify the employer if they are unwell whilst furloughed, since they are unable to undertake work for the furloughing employer so it is irrelevant if they are deemed incapable of work. But a furloughing employer will need to know about and bear sickness/self-isolation in mind if rotating employees between 3-week+ periods of furlough to spread the fairness of work and pay reductions.

The guidance makes it very plain that an employer can furlough:

  • Those who are shielding or need to stay at home with someone who is shielding “if they are unable to work from home and you would otherwise need to make them redundant” (although how they test that statement is unclear).
  • Those who have childcare/other caring responsibilities which mean they are unable to work.
  • Those on fixed term contracts – you can extend or renew their contracts whilst furloughed without breaching the CJRS.
  • Office holders, company directors including those who are directors of their own personal service companies (and these directors are still able to comply with statutory director obligations whilst furloughed), salaried members of LLPs, agency workers paid via PAYE and limb (b) workers (aka “gig economy personal service workers”).

Employees who already have two jobs can be furloughed from one or both. Employees who are furloughed from your employment are also able to go on and work elsewhere whilst furloughed so long as their contract of employment with you allows this (or, presumably employers can waive any/some outside interests clauses to allow this where you are happy for employees to do so).

Employers recruiting at present should ask applicants if they are currently furloughed from another role and fill out a specific starter checklist (Statement C) if they are.

You have to confirm furlough in writing to employees and keep this record for five years.

Overtime, fees, commission, bonuses or any other non-cash payments that you are contractually obliged to pay should be included in the reference salary. Discretionary bonuses, tips, commission payments and no-cash payments are excluded though.

Neither benefits in kind nor benefits provided via salary sacrifice schemes should be included in the reference salary. Benefits to which an employee is entitled will continue alongside wages paid under the CJRS.

The CJRS does not cover Apprenticeship Levy or Student Loan payments, both of which must continue to be paid as usual.

National Minimum Wage does not apply to furloughed workers (unless they spend any time training, in which case they should received NMW for that time – which is likely to be the case under the CJRS unless they were already paid close to NMW levels and need to undertake a substantial level of training).

Claims for CJRS can only be backdated to 1 March where employees were already furloughed (this can only really cover those who were made redundant and re-employed).

Employees can be furloughed rotationally and multiple times – so long as each period of furlough leave is at least 3 weeks long.

Employees on furlough leave remain entitled to redundancy payments (and the CJRS cannot be used as a substitute for redundancy payments).

What still isn't answered in the guidance?

  • What does being "hired on or after 28 February 2020" actually mean? Is it when the new employee was placed onto the payroll system or actually started working that is relevant? 
  • Do casual/zero hours workers still accrue annual leave (which is a potential liability for employers) even though they had no entitlement to work/hours for the period they are being furloughed?
  • Can an employee be on furlough leave and annual leave? If so, what are they entitled to be paid during this time – would it be 100% (rather than 80%) and does the employer become liable for topping up to 100% of full pay? Current ACAS guidance on annual leave and furlough suggests that annual leave can be booked as usual during furlough, but we await further clarity within government guidelines on this point.
  • What happens to statutory maternity/other family leave when someone is furloughed – does maternity leave have to be bought to an end to enable recovery under the CJRS?
  • What about employees who TUPE transfer after 28 February 2020? Is it right that the transferee cannot furlough them as they were not on their payroll as at 28 February 2020? This appears to be the unsatisfactory result of the CJRS as it currently stands. 

For further detailed guidance of how furlough might help your business at this challenging time please contact our dedicated Covid19 response team.

We can provide detailed advice on areas such as:

  • the process for agreeing furlough;
  • how to deal with annual leave and furlough; and
  • how to fairly select employees for furlough.

For cost certainty we have designed a fixed cost package of the advice that employers will need to implement the scheme safely for £1,000 plus VAT.

To read the Government advice click here.

If you'd like to get in touch with us, a coordinated team of experts are leading our support and can be contacted collectively using our dedicated inbox: [email protected].

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