News update - Coronavirus Job Retention Scheme
Following the announcement of another 4-week lockdown beginning on Thursday 5th November, the Job Retention Scheme was extended until 31 March 2021. It has since been extended again, until 30 April 2021.
Under the extended scheme furloughed employees will be able to receive 80% of their pay for hours not worked, up to a maximum of £2,500 a month, while employers will have to pay their National Insurance and pension contributions.
Neither the employer nor the employee need to have used the Job Retention Scheme before to be eligible for this latest extension.
N.B. The Job Support Scheme which was due to start this month has been postponed. Likewise, the Job Retention Bonus has also been withdrawn - for now - and will no longer be paid in February 2021.
The current policy will be renewed in January and may see employers having to contribute more. We will update our guidance here with any changes as and when they are announced, for more details, the government’s policy paper detailing the full extension can be found here on .gov.uk.
News update - Job Support Scheme extension (POSTPONED)
On 09th October 2020 the government announced that it would pay 67% of staff wages for hours not worked if their employer had been forced to close down by law as a result of coronavirus restrictions.
Following that announcement, the scheme was then boosted on 22nd October to both reduce the employer’s contributions to 5% of hours not worked while the minimum number of their usual hours staff need to work to be eligible was reduced to 20%.
Grants will be capped at £2,100 per member of staff per month while the business is subject to restrictions and staff must be off work for a minimum of 7 days to be eligible.
Winter Economy Plan & Job Support Scheme (POSTPONED)
On the 24th September the government announced the job retention scheme would be wound up at the end of October, as planned.
From the 01st November 2020, the new Job Support Scheme will be launched, to continue to support jobs and businesses for a further 6 months.
How does it work?
Under the Job Support Scheme, employees working reduced hours will be paid as normal for the hours they work, with the government and their employer stepping in to top-up their pay for the hours that they don't work.
To be eligible, employees must be working for at least 33% of their usual hours. The government and their employer will then each pay an additional 1/3rd of an employees usual salary (the government's contribution is to be capped at £697.92).
In other words, under the new scheme the government's contribution will be reduced to a maximum of 22% of workers pay, but an employee can still earn 77% of their pay for the hours that they don't work.
The Job Support Scheme is open to all SME's and you don't need to have already furloughed employees under the job retention scheme to be eligible. Eligible employees will have to have been on the employer’s PAYE payroll on or before 23 September 2020.
N.B. Employees cannot be made redundant or put on notice of redundancy during the period within which their employer is claiming the grant for that employee.
The full Winter Economy Plan announcement can be viewed here
*The government’s Job Support Scheme hub is here. N.B. this guidance was withdrawn on 01st November 2020
News update - Furlough and redundancy
Under new laws that came into force on Friday 31 July, furloughed employees who are being made redundant will receive statutory redundancy pay based on their normal amount of pay and not their reduced furlough pay.
This legislation also applies to other employment rights, such as statutory notice pay and awards for unfair dismissal, which are calculated on the basis of an individual’s average weekly pay.
Read the full announcement from the government by following this link.
News update - Job Retention Bonus (WITHDRAWN)
Once again, the job retention scheme is changing…
Announced on the 8th July 2020, the government have promised a one-off payment of £1,000 for employers, payable for each member of staff they bring back from furlough – known as the Job Retention Bonus.
To be eligible, staff must be paid at least £520 a month (on average) and remain continuously employed until the end of January 2021. Payments will then be made from February 2021.
The Job Retention Bonus is just one part of the government’s Plan for Jobs 2020 announced in the mini-budget on 8th July 2020.
So how does the scheme work, and who does it cover?
Under this emergency scheme, which first went live on 20 April 2020 (in time for businesses to run their April payroll), the government will cover 80% of the basic salary (gross) of an ‘at risk’ employee, up to a cap of £2,500 per month, per employee.
The government calls these ‘at risk’ employees ‘furloughed employees’, meaning staff that employers might otherwise have to lay off or make redundant, in the absence of this emergency 80% salary cover. There is, however, no requirement on businesses to demonstrate that furloughed employees must have first been identified for redundancy.
Many businesses have already applied for support under the scheme, having consulted with ‘at risk’ staff, sent letters requesting employee agreement to the arrangements and completed the online form on HMRC’s dedicated portal.
Legitimate vs inflated or fraudulent claims
HMRC has made clear on its website that it reserves the right to claw-back fraudulent or erroneous claims in the future.
How this will be audited was set out in the consultation announced on 29 May 2020.
In these proposals, the government confirmed that furlough grants would be taxable - meaning that for businesses who benefitted from the scheme – these could be subject to income tax at 100% if they are found to have misused or been ineligible for the support.
It's important to note that HMRC won’t only be targeting those who have deliberately misused the scheme, but businesses that may have made honest errors while applying for and operating the scheme will also be expected to pay back what they were not entitled to.
By treating the grant as a taxable sum HMRC will be able to use their extensive powers to investigate, impose and enforce penalties and even prosecute individuals in the course of trying to claw this money back.
However, the government has previously made clear on its website that HMRC has already put in place a means by which employees and/or members of the public can essentially whistle-blow on businesses that they suspect are fraudulently making job retention scheme applications.
If you know your business has received a payment to which it was not entitled, you must notify HMRC.
As a director, you may be personally liable if your business is unable to pay back the grants to which it was not entitled. The burden will be on you to prove that you did not know your business was not eligible for support.
No work for the employer during this time
‘Furloughed workers’ won't be able to work for the employer who furloughed them during the period where they're covered by this scheme – so the scheme is essentially being treated by the government as an alternative to redundancy, not as a subsidy for those continuing to work their jobs. This means that furloughed employees can’t do anything that generates money or provides services on behalf of their employer while they’re on furlough leave.
The government’s Treasury Direction, issued on 15 April 2020, also makes clear that employees must consent in writing to this restriction on their ability to carry out work for their employer during this period.
Employers may assign critical duties of furloughed employees to non-furloughed employees during the furlough period.
If, however, an employee works for more than one employer and only one of them furloughs them, the employee can continue to work for the other employer, without invalidating the furlough scheme cover.
The government has also clarified that if the employee’s employment contract allows them to work for someone else in the normal course, then they are not prevented by the scheme from taking up work for another employer during this period.
This is one of the areas of the scheme that will change, in light of the government’s decision to extend the scheme until the end of October 2020, and set out in the announcement of the next furlough steps on 29th May 2020
From 1 July 2020, employers could take advantage of improved flexibility to the furlough scheme. The 'flexible furlough' meant that staff could work part-time in any of the months ahead within the scheme as employers choose to bring them back, and the remainder of the time, they can be furloughed.
In other words, from 1st July, furloughed staff could be brought back from furlough for 1 day a week, or 2 (as the employer chooses), and for those working days, be paid normally and fully entirely by their employer.
N.B. the employer must enter into a new agreement with their employee in order to bring them back to work while they are on furlough.
Employees should be paid in full for the hours they work. For any other days that they are not working for their employer - during which they remain on furlough - the employer will need to claim a percentage of their employee’s wages from the government, subject to the caps and conditions set by the government (and these will adjust over the months).
Employers should keep detailed records of hours worked as these will be needed to submit an accurate claim to the scheme.
Employees can undertake training during their furlough period, provided that the act of training ‘does not provide services to, or generate revenue for, or on behalf of their organisation’. The government’s clarified position is that furloughed staff should be encouraged to carry out training.
However, where staff are doing training because their employer has required them to do so, they should be paid at least their appropriate National Minimum Wage for that training period. The expectation is that the 80% grant under the scheme would cover these costs, but employers need to keep an eye on this, as they may be required to top up the money paid to the employee if their training activities exceed the value of the job retention grant.
Again, this is a position that we expect to see changing from the end of July onwards, to permit training to also cover services that may generate revenue for the business. We will update once the position is confirmed.
Remaining an employee
Being put on the scheme won't disrupt the employee’s continuity of service. They'll continue to be treated as an employee unless or until they are made redundant - although the aim of the scheme is to help businesses avoid this outcome.
Employees under fixed-term contracts are just as eligible for furlough as those with indefinite terms. If an employee’s fixed-term contract concludes during the furlough period, the government has confirmed that those employees won’t lose their eligibility to continue as furloughed employees, where the employer extends or renews the fixed-term contract. Conversely, if the contract isn’t renewed or extended, the employee is no longer employed and the furlough eligibility ceases on the date the contract ends.
Employers may continue to claim from the scheme for furloughed employees who are serving out their notice period (either contractual or statutory).
N.B. As employees are not allowed do any work for their employer while furloughed, you may need to end their furlough so that a proper handover can take place.
Staff on statutory pay (sick, maternity, etc.)
HMRC originally said that staff who are already on statutory pay, whether that’s statutory sick pay, or maternity pay, for example, should remain on those arrangements and not fall under the Job Retention Scheme until they return to work, in which case they can then be covered by the scheme, if needed. Both cannot be claimed at the same time.
Staff on enhanced sick or other pay can, however, be furloughed from the outset, where needed.
The government has since clarified that:
employers can furlough staff on maternity or family-related leave. Where they do so, employers’ claims under the Job retention scheme for wage costs relating to these staff while they are still on this leave must be limited to any enhancements to these individuals’ statutory pay entitlements during their family leave period, and those enhancements will also be subject to the 80% cap under the scheme
it remains the case that an employee who is already sick and who is being paid statutory sick pay (SSP), cannot be furloughed until their period of SSP ends, at which point, they can be furloughed
an employee who is self-isolating/shielding in compliance with public health guidance (e.g. they’re in a risk category group or they have been exposed to a Covid-19 case, or they need to stay home with someone who has to be shielded), can be furloughed if they are unable to do their duties from home and the employer considers there are good business reasons to furlough them. (For more guidance on shielding and public health guidance, see here), and
if a member of staff falls sick while furloughed, it is for the employer to decide whether to move the employee on to statutory sick pay, or to keep them on their furlough salary. There is no obligation on the employer to move them to statutory sick pay instead of the (often more substantial) furlough salary. (However, if the employer does decide to move the employee on to SSP, the employer must cease claiming the furlough salary during the sickness period, although a rebate of up to 2 weeks of SSP may be claimed.)
workers who have been furloughed and who then take paid family-related leave on or after 25 April 2020, are entitled to their statutory maternity pay, paternity pay, shared parental pay, parental bereavement pay or adoption pay based on their pre-furlough normal weekly earnings during the eight week reference period used for calculating the statutory pay. This is the case even if some or all of this reference period falls during a time they were on furlough.
Staff who are furloughed and then ultimately made redundant retain the usual rights to redundancy pay, as it may apply to their circumstances.
Employees looking after children can be furloughed
The government has also clarified that employees can be furloughed if they can’t work because they need to look after children or have caring responsibilities for other dependents. There’s no obligation on an employee to furlough these, or any, employees. The decision is entirely for the employer to determine – although most employers are expected to take a considerate and pragmatic approach to the situational challenges faced by many working parents because of Covid-19.
- employees can take holiday leave during a furlough period and that
- they are entitled to be paid at their normal pay rate while on holiday and
- taking holiday during a furlough period does not disrupt their furlough leave.
This will likely reduce savings to employers, since it is also now clear that employers will be expected to top up the furlough grant to ensure the employee hits their usual salary level, during their holiday period. And that top-up cannot be claimed for under the job retention scheme.
The government also introduced a temporary change to the Working Time Regulations 1998, allowing workers to carry over up to 4 weeks of holiday and to be permitted to take it over a period of up to 2 years, if the impact of Covid-19 has prevented them from being able to take their holiday.
In normal times, most workers have a statutory right by law to take 5.6 weeks of paid holiday each year. Usually, it is not permitted by law for that holiday to be carried over except in exceptional and limited circumstances. Employers are expected to persuade their staff to take this leave, as it is important for health, safety and general staff wellbeing reasons.
The government intends for this temporary measure to relieve pressure being felt, especially by essential services sectors and key workers, where every member of staff is pitching in to help manage the circumstances.
However, all workers are entitled to request this carry over right, provided that it’s clear it wasn’t ‘reasonably practicable’ for them to take some or all of their leave because of Covid-19’s impact on the business they work for - and this will need to be shown for them to be eligible for it.
By law, employers can require employees to take holiday too – provided that they have given the relevant employee(s) the required legal period of notice of the holiday start date. The length of notice must be at least twice the period that the employee has requested to take as leave, though some contracts of employment go further than that length of notice period, so employers should check contract wording before taking this approach. The government's guidance also makes clear that before requiring employees; to take holiday, employers should:
- explain their reason for wanting the employee to take holiday, and
- consider the employee's circumstances, particularly regarding social distancing, self-shielding, Covid-19-caused care responsibilities, to see whether these would in fact prevent the employee from being able to rest and enjoy leisure time - the fundamental objective of holidays. If they would, there appears to be the expectation that the employer should no require the employee to take time off as holiday leave.
During the holiday period, while on furlough leave, the employer is expected to pay the full amount of holiday pay that would be due to the employee in normal times. However, the employer will still be entitled to claim the 80% grant for that employee, under the Job Retention Scheme.
Owner-managed businesses (personal service company challenges)
These one-person businesses (typically self-employed contractors and freelancers running their business activity via a sole trader model) aren't intended to be covered by the Job Retention Scheme.
The government has announced an equivalent Covid-19 emergency scheme under which they may be able to claim in a similar way to employers for their employees.
This separate scheme is called the Self-Employment Income Support Scheme. Please see our separate blog on what the government's emergency Covid-19 measures mean for the self-employed.
What’s the definition of ‘salary’ under the scheme?
Salary is apparently to be defined as ‘gross’ basic salary. It will not include other additional payments that an employee would ordinarily have been able to build up, e.g. overtime, commission and/or bonuses. This is going to hit employees whose regular income is substantially reliant on these latter elements.
The government has also now confirmed that the 80% grant will apply even where it takes an individual below the national minimum wage/national living wage. Employees affected in this way will need to rely on other reliefs offered by the government during this period.
Government guidance does say that employers can choose to ‘top-up’ a payment to individuals who they furloughed, without invalidating the entitlement. Few small businesses are expected to be able to do so, however. Most will be conserving every penny they can to protect cashflow and to keep the business going, so that furloughed employees can look forward to a return to work as soon as possible.
At the moment, PAYE and NIC are both still payable, by employees.
(Employers may be able to delay or to defer their PAYE obligations under HMRC’s Time to Pay scheme, although again, these payments are technically still due from employers at the usual times and in the usual way, for now. These arrangements are agreed on a case-by-case basis and are tailored to the individual circumstances of each business. You’ll be eligible if your business pays tax to HMRC and is going to struggle to meet the next payments and keep going. Call HMRC’s dedicated helpline to agree arrangements with HMRC: 0800 0159 559 or to find out more about the scheme, check here.
If my business goes under despite all my efforts, will I have to pay the government any money back?
No. This is not a loan, the government is giving the support in the form of a grant, essentially.
Want to access this guide?
Already have a Farillio account? SIGN IN
Get unlimited access to 100s of legal resources by signing up to Farillio today.
- Manage your legal documents online
- Well written legal templates by our partners
- Guides to help you understand law
- Legal help available every step of the way