Overview
Since the 20 March 2020 announcement of the temporary Coronavirus Job Retention Scheme, which is intended to support UK employers whose operations have been severely affected by Coronavirus (COVID-19), the UK government has published further details and guidance. On 27 March 2020, the Government also announced that it will amend the Working Time Regulations in order to allow statutory annual leave to be carried over into the next two years. This article offers a review of key aspects of this guidance to help employers address the ongoing challenges posed by COVID-19.
In Depth
The UK government has now published further details of the temporary Coronavirus Job Retention Scheme which it announced on 20 March 2020.
The scheme is intended to support UK employers whose operations have been severely affected by Coronavirus (COVID-19) by allowing those employers to furlough employees for whom there is currently no work.
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.
This alert provides a summary of some key aspects of the guidance on the temporary Coronavirus Job Retention Scheme. The full guidance can be accessed here.
WHO CAN USE IT
Any UK organisation with employees, including:
- Businesses
- Charities
- Recruitment agencies (agency workers paid through PAYE)
- Public authorities
This is subject to having a PAYE payroll scheme in place on or before 28 February 2020 and having a UK bank account.
WHAT EMPLOYEES ARE COVERED
An employee who was on the PAYE payroll on 28 February 2020 and on any type of contract, including: full-time employees; part-time employees; employees on agency contracts; employees on flexible or zero-hour contracts.
An employee working on reduced hours, or for reduced pay, is not covered.
The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer.
Employees hired after 28 February 2020 cannot be furloughed.
WHAT’S COVERED
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.
Fees, commissions and bonuses are not included.
HOW IS IT CALCULATED
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February 2020 should be used to calculate the 80%. Fees, commission and bonuses should not be included.
If an employee’s pay varies and they have been employed for a full twelve months prior to the claim, it is the higher of: the same month’s earnings from the previous year; or average monthly earnings from the 2019-2020 tax year.
If the employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
Once you’ve worked out how much of an employee’s salary you can claim for, you must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions you are entitled to claim.
WHAT ABOUT INCOME TAX
The wage you pay to furloughed employees will be subject to tax and other National Insurance contributions. You are also still liable for the minimum automatic enrolment employer pension contributions.
WHAT ABOUT TOP UP?
You can choose to provide top-up salary in addition to the grant but, to be eligible for the scheme, you do not have to. However, if you do not propose to do so, you should make this clear to employees with a view to obtaining their consent (whether express or implied).
Employer National Insurance Contributions and automatic enrolment contributions on any additional top-up salary will not be covered by the Government scheme. Nor will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3%.
WHAT ABOUT NLW/NMW?
As employees are not working, it does not matter if the 80% takes them below the NLW/NMW.
However, if furloughed employees 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% reimbursed by the Government.
WHAT CAN THE EMPLOYEE DO DURING FURLOUGH?
Nothing for the employer. This includes providing any services or generating any revenue.
However, they are able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.
WHAT IS THE PROCESS FOR CHOOSING WHICH EMPLOYEES TO FURLOUGH?
There are no set rules. There is no requirement in the guidance for a formal selection exercise. However, equality and discrimination laws will apply in the usual way (as will the implied term of trust and confidence).
CAN FURLOUGH BE ROTATED BETWEEN EMPLOYEES?
Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding. There is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks.
WHAT ABOUT OTHER FORMS OF LEAVE?
Employees on sick pay or self-isolating cannot be furloughed, but can be furloughed afterwards. 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, save that mothers must take the mandatory two weeks’ leave immediately following the birth of the baby.
Employees on unpaid leave cannot be furloughed, unless they were placed on unpaid leave after 28 February 2020.
Employers can only claim once every three weeks, i.e., they cannot get weekly reimbursement. Claims can be backdated to 1 March 2020.
WHAT DO YOU NEED TO MAKE A CLAIM
To make a claim, employers will need:
- The ePAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- Amount claimed (per the minimum length of furloughing of three weeks)
- The bank account number and sort code
- Contact name and telephone number
WHAT IS THE PROCESS AFTER YOU HAVE CLAIMED?
Once HMRC have received the employer’s claim and you are eligible for the grant, they will pay it via BACS payment to the employer’s UK bank account.
Employers must pay the employee the full grant received for their gross pay and are unable to charge fees on the money that is granted.
On 27 March 2020, the Government also announced that it will amend the Working Time Regulations in order to allow statutory annual leave to be carried over into the next two years. Key points of note include:
- The regulations will allow up to four weeks of unused leave to be carried into the next two leave years.
- As such, it is not reasonably practicable for a worker to take some, or all, of the holiday to which they are entitled due to coronavirus.
- While this amendment will not apply to the additional 1.6 weeks provided under UK legislation, the normal position remains that it can be carried forward one year by agreement between the worker and the employer.
- This amendment will help employers manage the stockpile of accrued holiday leave that workers may have once the COVID-19 crisis has abated.
