NEWS UPDATE 29 May 2020:
The Job Retention Scheme has now been confirmed as extended by a further 4 months to the end of October, and with employers being required to contribute to the costs from the end of July onwards.
Employees who are furloughed will continue to be entitled to the same amount: up to 80% salary subject to a maximum £2,500 cap.
The government provided more detail on how the extended scheme will operate on 29 May.
The key changes to note:
During June and July 2020: the scheme will remain as before in terms of caps and conditions: 80% of salary for employees, up to a £2,500 cap.
However, from 1 July, the government has now introduced the concept of 'flexible furlough' meaning that furloughed staff will be able to work for their employers part-time from this date, and the remainder of that time when they are not working, they can continue to be furloughed under the furlough scheme. The flexible furlough arrangement will continue from this date until the scheme expires.
Employers will be given 'maximum flexibility to decide on the right arrangements for their business, so for example, currently furloughed staff could, from 1 July, be brought back from furlough for 1 day a week, or more (as each employer chooses). For those working days, they should be paid normally and fully by their employer. For any other days that they are not working for their employer and during which they remain on furlough, the government scheme will pick up the tab, subject to the caps and conditions set by the government (and these will adjust over the months - see more on that below).
Crucially, to benefit from the job retention scheme in the future, staff must have been furloughed by June 10th, as no new entrants to the scheme will be permitted after 30th June.
From 1 August, the government/tax payer will continue to pick up the 80% tab for all furlough days. BUT, employers will need to pick up National Insurance and pension contributions from their own budgets.
From 1 September, the 80% contribution to the salary for all furlough days is reduced. The government/taxpayer will cover 70% of salary and employers will be required to contribute 10% of that figure, (so that employees remain unaffected and still get 80% up to £2,500 limit) but employers start to share the burden.
And from 1 October, the contribution for all furlough days will reduce further to 60% of salary, up to a cap of £1,875 ; employers will contribute 20% and make up the cap to £2,500 and 80% in total.
The government has also made clear that they intend the scheme to finish at the end of October and that they do not wish to see it being further extended.
Different reliefs cover the self-employed, who can seek financial support under a separate scheme (called the Self-Employment Income Support Scheme – see further here.
Huge thanks, as always, to our wonderful partner Boffix’s Head of Accounting Aaron Patrick for collaborating on this content.
**The remainder of this guide will be updated on 1 June, to take account of the above update.
If you intend to furlough staff under the scheme, remember that you must have done so by 10th June, to benefit from the extended period and continuing arrangements beyond 1 July.**
So how does the scheme work, and who does it cover?
Under this emergency scheme, which 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.
Businesses claiming under the scheme must have been registered as an employer with HMRC (on HMRC’s Real Time Information (RTI) system, and have had PAYE arrangements in place, before 19 March 2020.
The scheme will now run until the end of October (note the further extension, announced on 12 May, from its previous intended expiry date of 30 June).
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 in the aftermath of this period, is not that clear. However, the government has 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.
This scheme is back-dated to 1 March 2020 and will apply to the wages of affected staff for a period of 3 months (or possibly more if needed).
To be eligible for cover under the scheme, those employees must have been employed by the business before 19 March 2020. (Note the extension of the time-frame, which was previously 28 February, to 19 March).
Employers can only claim under the scheme where they can show that:
- they paid the employee during the tax year 2019/20
- they have made a real time information (RTI) return for that employee on or before 19 March; and
- the employee remains employed, i.e. the employer hasn’t reported to HMRC that the employee’s contract of employment is ceasing.
In practice, what this means is that although the date for eligibility has shifted from 28 February to 19 March, a number of newly joined staff will still not be eligible to be furloughed under the scheme; this affects those for whom the employer hasn’t yet processed a payroll salary/submitted a real time information return to HMRC for that processing to take place.
For example, a new joiner on 4th March, who would not be paid until 28th March, in line with a business’ normal payroll arrangements, would not be eligible for furlough. New joiners paid on a weekly basis, and who would have been paid following the submission of an RTI to HMRC, would, however, fall within the scheme.
Eligibility of staff before 19 March therefore seems to be contingent on RTI submission dates.
New hires since 19 March 2020
Recent updates from HMRC confirm that employers can now furlough and claim for employees provided that they were on the payroll before 19 March 2020.
Anyone engaged after this date will not be covered by the scheme. Short-term working or unpaid lay-off arrangements are the options here if your contract permits you to take these measures. If not, you will need to discuss with your relevant employees and try to get their consent to instigating one of these measures so you can try to keep them within the business.
If lay-offs become the only option, it is possible to rotate lay-offs, e.g. 1 week on, 1 week off, so that staff could at least have the option of 50% of salary during their usual period, if this is something your cashflow can support. For some staff, this might leave them better off than under the Job Retention Scheme, so it’s worth doing the maths on this.
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 the requirement that employers contribute to the costs of the scheme set out in the announcement of the next furlough steps from 29th May 2020.
From 1 July, employers will be able to take advantage of improved flexibility to the furlough scheme. The 'flexible furlough' means that staff will be able to 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.
For example, currently furloughed staff could, from 1 July, 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. For any other days that they are not working for their employer and during which they remain on furlough, the government scheme will pick up the tab, subject to the caps and conditions set by the government (and these will adjust over the months).
The government has now confirmed that 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.
All staff on the payroll
The guidance from government refers to all staff on the payroll being covered by this scheme (provided they were on the payroll as of 19 March 2020), which means that workers the business pays PAYE for will also be covered, including zero-hours workers who are on the payroll/PAYE and PAYE-covered agency workers who are not doing paid work anywhere else during the furlough period.
Apprentices can be furloughed under the scheme in the same way as other employees who are covered. Unlike employees, they’re permitted to carry on training, where this is feasible. They must be paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage during the time they’re working and training as an apprentice. This may well mean that employers will need to top up the 80% basic salary that the Job Retention Scheme covers for these individuals. The government’s provided more information on any changes to apprenticeship training arrangements that employers are forced to make because of Covid-19.
PAYE-salaried directors can furlough themselves. During that period, they may only carry out their statutory duties as directors, and according to the requirements of the scheme, they must ‘do no more than reasonably be judged necessary for that purpose, for instance, they should not do work of a kind they would carry out in normal circumstances to generate commercial revenue or provides services to or on behalf of their company’.
The government has also made clear that contractors/freelancers who are owner-directors of their own personal service companies, and take a salary from it, are equally bound by these same rules. They must also not carry out commercial work during the period if they wish to furlough themselves under the scheme. (This is an area currently being queried by a number of organisations, including the ICAEW, who feel that the £575pcm to which this equates, places these individuals in a hugely difficult position.)
Any decision to furlough a salaried director must be formally decided and recorded as a board decision, and the decision must be set down in writing to that director.
Non-executive directors may not qualify depending on the terms on which they have been engaged and are paid.
Salaried members of limited liability partnerships (LLPs) may also be furloughed. Like directors, a formal decision must be taken by the LLP management in respect of each furloughed member and they may not do any work for the LLP during that period. The arrangements here are quite complicated and it would be sensible to take expert advice – not least to help calculate the impact to the member’s remuneration and profit allocations of any period of furlough.
Nannies, housekeepers, drivers and other personal/family staff
Family or household staff can also be furloughed by individuals who employ them, provided that they pay them via PAYE and, like all other eligible employees, these individuals were on the payroll on or before 19 March 2020.
Umbrella workers and umbrella companies
Workers under umbrella arrangements, who are paid under the PAYE system will also be covered, but umbrella companies won't be permitted to deduct any administration fee from the furlough payment. 100% of the JRS grant must be paid to the furloughed worker.
The furlough terms must be agreed between the umbrella company (who’s essentially in the role of employer in these circumstances) and the PAYE agency worker. And as with all other payroll staff, the worker mustn’t carry out work for the agency/its clients during this furlough period.
Staff who’ve already been laid off or made redundant since 28 February, but before 19 March 2020
- you’ve had to make staff redundant since 28 February but before 19 March, or
- employees left your employment on another basis between 28 February and 19 March,
- and, in either case, you are willing to re-engage them,
the government has made clear that you can bring those staff back, even now, and furlough them under the Job Retention scheme too. (There’s as yet no clear guidance on how to handle redundancy or notice payments already paid to those employees.)
Employees who have been placed on short-term working or reduced hours arrangements aren't covered by the scheme as they're still working and haven't been furloughed.
To qualify for the payment, an employee must be furloughed for a minimum of three weeks before they are brought back into the business. They can then come off furlough when and if the business can then afford to bring them back. It has now been confirmed that it is acceptable to furlough an employee more than once, provided that a minimum of 3 weeks is taken in each instance.
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 now 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.
It’s finally been clearly confirmed by the government that:
- 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.
If you’re planning to furlough 20 or more members of staff on your payroll, you should run a consultation process and you should consider electing employee representatives who can help you to manage the communications and consult on alternatives. This adds time to the process, but, if in any event, you foresee that even with the furlough arrangements, you may be making a large number of staff redundant in a few months, the consultation that you undertake now can count as part of the redundancy consultation process. (The redundancy process can be started even while staff are furloughed).
It’s best to take expert advice fast if you’re facing this kind of impact, for this many employees, whether on furlough or as part of a subsequent redundancy process.
Businesses in administration
Employees of businesses who are now under the management control of an administrator may benefit from the administrator deciding to furlough them under the scheme. It’s anticipated that this would only happen where the administrator considers that the business can be saved by either sale or restructuring and, as a result, those employees would likely be hired under the new regime.
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.
How can I apply?
Sector doesn’t matter. Size doesn’t matter. In principle, all UK businesses are eligible to apply for this scheme, including public sector, charities and local authorities, though note the points made above about fraudulent or inflated claims.
You apply using the application process HMRC has put in place.
The scheme went live for processing applications on 20th April.
The service is designed to be self-serve online, with guidance in place. The government’s encouraging businesses and accountants to work together to ensure complete and accurate applications, to support the efficient and quick reimbursement of the grant monies.
The new portal identifies what information is needed and guides you through the process.
This application process will be modified, in due course, to take into account the government’s intention that from the end of July, employers will need to pick up national insurance and pension contributions from their own budgets.
In the meantime, you can prepare by following the notes below:
Set up payroll to recognise furloughed pay and help you to identify the amounts to reclaim (you may want to get your accountant to help with this). The Treasury Direction contains detailed advice on how to calculate the reference salary and what elements of pay must be excluded
Identify your ‘at risk’ employees / already laid off employees (fairly and with no unjustifiable discrimination) and calculate furloughed pay based on the last pay period prior to 19 March 2020. (Employers who have calculated their claim based on the government’s earlier guidance, working on the employee’s salary as at 28 February, can still choose to use this date.) This will enable you to establish a base pay to which you can apply the 80% furloughed grant. Do not include any discretionary overtime, discretionary commission or bonuses, tips, non-cash payments and/or non-monetary benefits (e.g. benefits in kind, including those provided via a salary sacrifice scheme and pension contributions). However, you can include past overtime that’s due to be compensated, and any compulsory fees or compulsory commission payments, as well as piece rate payments. The government has also recently clarified that non-discretionary payments, (e.g. overtime, commissions, fees) 'made in recognition of a member of staff undertaking additional or exceptional' responsibilities' can potentially also be treated as normal pay.
Grants will be pro-rated if an employee is only furloughed for part of a pay period
They can only be calculated from the day after employment finishes to the day before the employee returns to work
If any employee’s salary varies, and they’ve been employed for more than 12 months, claim the highest of either: (a) same salary from the same month in the year before, or (b) average monthly earnings for the 2019–2020 tax year. If they’ve not been employed for more than 12 months, calculate the claim based on 80% of their average monthly earnings since they started working for you
Claims for staff returning from maternity leave or other statutory leave, should be calculated on the basis of their normal contracted salary, and not the pay they may have received while on this leave.
Staff who are on maternity or other types of family leave should remain on that leave unless and until it ends in the normal way and the normal pay rules apply to them. However, HMRC has now said that employers can still furlough these staff while they are still on this leave. Where employers decide to do so, claims under the Job retention scheme for wage costs must be limited to any enhancements to these individuals’ existing statutory pay entitlements, and those enhancements will be subject to the 80% cap under the scheme
PAYE tax will still be due from you. HMRC has confirmed now that in addition to 80% of the basic salary (as capped), employers can also claim for the associated employer national insurance contributions and minimum automatic pension contributions on that subsidised wage – but not on any top up that you also choose to grant outside of the scheme (you’ll still need to pay these). The maximum that an employee can be paid under this scheme is £2,500 gross. So, for employees where this cap is relevant, and if you intend to top them up, calculate the additional pay needed to get them to their ‘normal’ pay level
Apprenticeship levies and student loans must still be paid as normal
Notify and agree in writing with all affected employees, these new working and pay arrangements (in most cases, you will need to put these changes in writing to your affected employees and have them sign the notification to accept them as the alternative to being laid off unpaid / made redundant)
You may need to notify trade unions also, if relevant to your business
Apply to HMRC. If you’re doing it yourself, rather than via an agent, you'll need:
- your employer PAYE scheme reference number
- your corporation tax unique taxpayer reference
- your UK bank account number, sort code and bank address
- the number of employees you’re proposing to furlough, (if 100 or more, you’ll need to upload files in a particular specified format for each employee, as directed by HMRC)
- each employees' national insurance numbers, their salary, their payroll reference/employee number
- details of the full amount you’re claiming for, including employer NICs and minimum pension contributions
- the start and end dates of the claim for each employee
- your contact details
You should meanwhile reduce wages to 80% in your payroll system before you pay your employees, since HMRC has made clear that it won’t make that adjustment.
You’ll need to account for the 80% reimbursement as income and it must be included in your taxable profits, according to HMRC
Employees must still pay the usual tax on their wages during this period, and they must still make their pension contributions unless the employee has opted out or stopped paying into their pension.
You do not need to furlough for the full Job Retention Scheme coverage period (1 March - 31 October 2020)
There is a minimum 3-week furlough period that employees must complete if employers include them under the scheme. However, it’s not required that employees be furloughed for the full period, and it has now been confirmed that an employee can be furloughed more than once, provided each period lasts for at least 3 weeks.
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.
Will I need employee consent to put them on the scheme?
Yes, although advice from the government’s has been a bit confusing on this and as the furlough scheme extension period, and the inevitable new rules that accompany it, are rolled out, new communications between employers and employees surrounding working and pay arrangements will need to be made; employees will still need to consent to any fresh changes to their contracted employment terms.
In the meantime, despite the fact that according to the government’s Treasury Direction, issued on 15 April, employers and employees must have agreed furlough arrangements in writing, it seems that under a new Direction published by the Treasury on 22 May, that a written agreement itself is not needed, although written confirmation that the employee has agreed is still necessary; and if a written confirmation is used, it must still set out clearly the main terms and conditions upon which the employee will cease all work. So an employer could now, for example, confirm by email that the employee has been consulted and agreed to the furlough arrangements. For the time being (until the new 'part-time' furlough scheme rules come into force from the end of July), that written agreement or written record, must (still) clearly include the employee’s consent to the fact that they will not work for their employer during the period during which they are furloughed.
Experts anticipate that any subsequent audit by HMRC of a business’ handling of its furlough arrangements (to ensure no abuse or inappropriate/fraudulent claims), will include requesting evidence of this written consent in each employee’s case, for at least for as long as the government’s prohibition on an employee carrying out any work for their employer persists. The government’s current intention appears to be that there will be no change to the existing furlough scheme arrangements until the end of July.
While the expectation is that most employees would likely be relieved to know that, instead of redundancy, they'll retain their jobs, have some time out and be paid at least something during while their employers battle to keep their businesses going, this arrangement does result in a change to an employee’s normal working status and their contractual pay expectations.
But even here, bearing in mind the Treasury Direction’s requirement of employee consent to be evidenced in writing, and since most contracts will not cover a furlough arrangement specifically (since it’s so novel), we highly recommend that you put something in writing between you and the employee to confirm not just consent to not work during the furlough period and the detail of the furlough arrangements, but also what you intend to happen after the furlough period comes to an end, i.e.:
what's happening: you’ve identified them as an employee who's already (under lay-off arrangements), or will be, furloughed under the government’s emergency Covid-19 job retention scheme
why it's happening: the business doesn't have sufficient cashflow to pay staff their salaries and all available funds are needed to keep it going so that staff have a job to come back to in a few months’ time
what the impact will be: salaries will be affected but, while a reduced salary is unavoidable, the arrangements are preventing the need for unpaid lay-offs and/or immediate redundancies. The government arrangements are also more generous for employees than statutory redundancy pay. Pay, benefits, overtime, commission etc. will be altered under these arrangements as follows: [you’ll need to complete this] and the employee won't be able to do any work for the business (or any associated business) during this furloughed period without risking the invalidation of their entitlement to be covered by the scheme
that PAYE and NIC is likely to still be payable by the employee on the money that they receive under the scheme, deductible at source in the usual way; (the government hasn’t announced any intention to defer or suspend this, as yet)
the timeframe that the arrangements will be in place; and
what you consider will happen after that – which is likely to be a holding position: keeping the situation under review depending on what both the government decides to do and the business can support at that time.
You can use ourletter changing employment contract for furlough arrangements template to do all of this quickly and simply.
Do not assume that silence from an employee in response to a furlough letter, implies that they have consented to the change of their contract terms. The High Court has recently ruled, in it's first ever decision on furlough schemes, that employee silence cannot be taken as consent. The employee must confirm their consent to the arrangements, where the contract does not give the employer the right to lay them off. If consent is not received, employers will need to consider what other options exist, besides furloughing an employee. In many cases, this is likely to be a redundancy situation of, if their contract permits, an unpaid lay-off arrangement.
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.
However, in an update announced on 12 May and later confirmed on the 29th, the government made clear that from the end of July, while workers will continue to be entitled to receive 80% of their pay (up to the same cap of £2,500) under the scheme, employers will need to pick up national insurance and pension contributions from their own budgets.
If employees want to work for someone else during this time, will this invalidate their ‘furloughed status’?
Employees working for more than one employer can continue to work for their other employer, if they have not been furloughed by both.
The government has also confirmed that employees can work for someone else during this time, provided that their employment contract permits them to do so.
Volunteering is also permitted.
Selecting employees for furlough treatment
As with any other employment process, it’s just as vital to ensure that employees selected for furloughing are fairly treated, according to rational business criteria that do not discriminate against any individual member of staff. Your equal opportunities and diversity policy is just as applicable here, as ever.
If employees want to volunteer to support the NHS and care services
Separate to the furlough arrangements, HMRC has now confirmed that employees will be able to apply for ‘statutory volunteer leave’ to support the NHS call-out for emergency voluntary help during this Covid-19 period.
This means that eligible employees of businesses who have 10 or more employees (and no fewer), who want to volunteer to help the NHS, may ask their employers for a block of two, three or four consecutive weeks of unpaid volunteering leave.
While this leave will be unpaid, the government has said that it intends to compensate workers who take this volunteering leave for their loss of earnings and it will provide a travel and subsistence (e.g. money for meals) allowance. Details of how this will happen haven't yet been released, but we'll update this blog when they are.
The volunteering period is currently set to run for 16 weeks beginning on the day the provisions come into force (we’re still waiting for the key regulations that will make this happen), though the government has said that the period may be extended.
To apply for this special leave, employees must give their employers 3 working days’ notice and they must give their employer a certificate from the relevant health/other authority, confirming their emergency volunteer status and the dates when their service will start and end.
Employees working for employers with fewer than 10 employees aren't eligible for this special leave.
Employers of eligible workers aren't permitted to say no to this request on operational grounds. The current advice, however, is that a request by an employee to volunteer under this special leave entitlement shouldn't prevent the employer from furloughing that employee if it needs to do so.
With the exception of their pay entitlement, while they're taking this special leave, employees are entitled to all their usual contractual benefits and they may not be dismissed or selected for redundancy because they have requested and taken this leave. They are fully entitled to return to their job once the period of volunteering has ended.
Employers should take advice in relation to any action, whether disciplinary, redundancy or other, taken in relation to an employee who volunteered.
What happens next?
The Job Retention Scheme has now been confirmed as extended to the end of October by the government, to support business efforts to transition back to more ‘normal’ trading conditions. From 1 August, the government/tax payer will continue to pick up the 80% tab. BUT, employers will need to pick up national insurance and pension contributions from their own budgets.
Experts are advising businesses to plan carefully now for how they may manage their staffing arrangements both during this extended furlough scheme period and after the expiry of this period.
Many businesses will need to bring staff back gradually, perhaps on reduced hours, or keeping some members of the workforce (where feasible), on remote-working for a while longer, or rotating staff in shifts. It may also mean needing to revisit lay-offs (where contractually permitted) and potentially, redundancy, although the extension to the scheme by a further 4 months will be welcome news for many businesses.
If you need support with this strategic planning and any of the resulting documentation that might need to be put in place with members of staff, our expert partners at WJM, Martin Stephen, and his superb, small business-friendly team, can support you.
And for help on the payroll, financial planning and accounting side of the furlough arrangements including preparing for the revisions to the application process from the end of July onwards, the excellent Aaron Patrick and his colleagues at Boffix are working with small businesses across the UK on exactly this right now.
They’re both our choice of adviser.
We’ll be looking in more detail with Martin and Aaron, in more of our Covid-19 Rapid Fire video sessions, at how businesses can sensibly and realistically plan and prepare for the world after the Job Retention Scheme, and once the lockdown arrangements start to lift.