Coronavirus Job Protection Scheme frequently asked questions answered!
On 20 March 2020, Rishi Sunak, Chancellor of the Exchequer, announced an “unprecedented” intervention to protect jobs through “The Coronavirus Job Retention Scheme” and all UK businesses, irrespective of size, are eligible.
What does the Furlough Scheme cover?
Under this scheme the Government will reimburse up to 80% of the employers’ wage to a cap of £2,500 per month, per employee. Additionally, the scheme will reimburse the employer’s National Insurance contributions and minimum auto-enrolment employer pension contributions on the furloughed payment (i.e the 80%).
There is a similar scheme for the self-employed, for more information click here.
Why furlough instead of lay-offs?
The scheme aims to provide security for employees during the Covid-19 pandemic by providing financial support to businesses to enable them to retain employees rather than laying off employees. Therefore, employers whose operations have been affected by the current crisis will be able to keep employees on their payroll, and then be able to apply for a grant to recover a proportion of the wage costs.
Furlough and salaried employees
For salaried employees, the reimbursement is based on the employee’s basic salary – commission, bonuses and other supplements will not be included. For employees whose pay varies, e.g. those on zero hour contracts, the reimbursement will be based on either their equivalent pay in the same month in the previous year or their average monthly pay over the 2018/19 tax year, whichever is higher.
Do employers have to “top up” the 80% salary?
Furloughed employees will get paid 80% of their salary, however, the payment is not conditional on the employer “topping up” the payment to the full 100%.
How long can an employee be furloughed?
It is anticipated that the scheme will run for three months to 31 May 2020 although, this could be extended. In addition, payments can be backdated to 1 March 2020, if the employee was laid off or given notice of redundancy after this date but before the scheme was announced.
What does ‘furloughed worker’ mean?
Furloughed workers are employees who have been asked to stop work for a minimum of 3 weeks because of the Coronavirus pandemic, either because their work has diminished or gone, or because the employer cannot afford to the pay wages. The employees are effectively on temporary suspension from work, with terms and conditions remaining in place. It is unclear at the moment, but this may mean that holiday entitlement could continue to accrue during the suspension period.
How to furlough employees?
Being designated as a “furloughed worker” is not automatic. The employer must elect to change the status of the employee to a “furloughed worker” and keep a record of that change. In making the change, the employer must comply with employment law and contractual provisions. This means that the employer may need to get the consent of the employee to make the changes, particularly where pay is being reduced. This depends on how the employment contract is drafted because some contracts already contain a right to layoff or make such changes. Where employees are being selected for furloughing, the selection must be reasonable and objective. Employers may also need to go through redundancy procedures of identifying and consulting with at risk employees, including the collective consultation requirements where more than 20 employees are affected. This could mean that it takes up to 45 days before the employees can be “designated” as a “furloughed worker”.
Which employees can be furloughed?
Any employees paid through PAYE can be furloughed, including those in full-time, part-time, agency, flexible or zero-hour contracts, as long as they were on the company’s payroll on 28 February 2020. Information provided by HMRC also suggests that sole directors of a company are covered by the scheme, provided they have an employment contract and were paying PAYE.
Can furloughed employees work?
Employees being put on furlough leave, must cease working for at least 3 weeks and cannot take up other employment with the same employer. They can undertake training for the employer and can volunteer or work for other employers. Employees already on reduced hours or pay cannot be furloughed.
If employees have already been made redundant, can they be re-hired and put on furlough leave?
Yes, as long as they were on the payroll on 28 February 2020.
How do employers access the scheme?
Once an employer has designated affected employees as furloughed workers, they must submit details through a new online portal being set up by HMRC, which will be available by the end of April 2020.
The employer will need to provide HMRC with:
• PAYE reference number
• The number of employees being furloughed
• The claim period, the start and end date
• Amount claimed
• Employee bank account information
• Employee name
• Employee phone number
How Blaser Mills Law can help your business
If you would like more information on the Furlough Scheme, sign up for one of our informative webinars. You can find more information on dates here.
We have been and continue to advise businesses on their employment and HR strategy and planning. If you would like a video call with one of our employment lawyers please contact James Simpson, Head of Employment, on 01494 478689 or at firstname.lastname@example.org