Last night The Treasury website published some guidance for employers on how the Coronavirus Job Retention Scheme will work. This is you will recall the scheme under which employers can recover 80% of the cost of the wages of employees who are furloughed.
Many questions which we have to date been unable to answer have been covered.
Some previous interpretations of how the scheme will work have not made it into the final version. For example, it was announced on Moneybox last weekend that the Treasury had advised that the pay for employees with variable hours would be based on their earnings in February. The final version is rather more sophisticated than this as you will see below and no doubt arises from some prolonged wrangling and discussions!
We have made the point several times over the last week that employers need to be very careful with employment law. The Treasury themselves say that “when employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way”. They also say that “to be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication”. So we would strongly advise you to take advice in furloughing employees and make sure you get their agreement to any change in the contract this entails. The best thing you can do is to take advice.
We have removed the introductory waffle but in the main, the points below are lifted directly from the Treasury website:
- Employers can use a portal to claim for 80% of furloughed employees’ (employees on a leave of absence) usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Employers can use this scheme anytime during this period.
- The scheme is open to all UK employers that had created and started a PAYE payroll scheme on 28 February 2020.
- You must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
- Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract
- The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
- To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue. While on furlough, the employee’s wage will be subject to the usual income tax and other deductions.
- If an employee is working, but on reduced hours, or for reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
- Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
- To be eligible for the subsidy employers should write to their employee confirming that they have been furloughed and keep a record of this communication.
- Employees hired after 28 February 2020 cannot be furloughed or claimed for in accordance with this scheme.
- You do not need to place all your employees on furlough. However, those employees who you do place on furlough cannot undertake work for you.
Some less common situations:
- If your employee is on unpaid leave
- Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February.
- If your employee has more than one job
- If your employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
- If your employee is on Statutory Sick Pay
- Employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this.
- If your employee does volunteer work or training
A furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of your organisation.
However, if workers are required to, for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
If your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay
Individuals who are on or plan to take Maternity Leave must take at least 2 weeks off work (4 weeks if they work in a factory or workshop) immediately following the birth of their baby. This is a health and safety requirement. In practice, most women start their Maternity Leave before they give birth.
If your employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance, the normal rules apply, and they are entitled to claim up to 39 weeks of statutory pay or allowance.
Employees who qualify for SMP will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.
If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
If you want to discuss how any of the above relates to you or your business please do get in touch.