Information correct as at 8 April 2020
Please refer to our next Employment Bulletin articles for latest updates.
What is the Government’s ‘Coronavirus Job Retention Scheme’ (CJRS)?
This is a scheme under which the Government has offered grants (subject to meeting certain conditions) to cover 80 per cent of the wage costs of employees who are ‘furloughed’ by their employer – up to a maximum of £2,500 per month.
When does the CJRS come into effect?
The CJRS guidance states that the scheme can be backdated to cover the period from 1 March 2020. HMRC have indicated that the online portal to submit claims for reimbursement will open on 20 April 2020 with reimbursements being made on or around 30 April 2020.
The CJRS states that to claim, employers will need their:
Employers will need to calculate the amount they are claiming and HMRC will retain the right to retrospectively audit all aspects of the employers claim.
How does an employer designate an employee as furloughed?
The CJRS guidance indicates that employers can only make a claim if they have provided their employees with written confirmation that they have been designated as furloughed. This record of communication must be kept for five years.
Designating an employee as furloughed is subject to the normal rules of employment law and in most cases will amount to a contractual variation of the terms of employment. As such, the employer would need their employee’s consent to furlough and to reduce their pay from 100 per cent to 80 per cent if the employer is not intending to top-up wages. Employers should therefore be discussing with their employees the prospect of being furloughed with a view to obtaining their consent to do so. In some cases, depending upon the circumstances, employers may need to collectively consult with their employees in order to obtain consent and comply with their employment law obligations.
Which employers are eligible?
The guidance to the CJRS confirms that the scheme is open to all UK organisations that have:
However, there are some exceptions with regards to the eligibility of public sector employers who continue to receive funding for staff costs.
Which employees are eligible?
The CJRS guidance confirms employees who are on the employer’s PAYE as of 28 February 2020 are eligible for the scheme, no matter the type of working arrangement. For example this can be part-time, full-time, fixed term or zero hour contracts, agency workers or apprentices. With regards to agency workers, it would seem to mean that the end user terminates the assignment of a particular worker and the agency would then place the worker on furlough.
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed. However, the employer must pay the apprentices at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage as appropriate for all the time they spend training. As such, an employer may need to cover any shortfall in pay.
The CJRS would also cover employees that have TUPE transferred from one employer to another after 28 February 2020 provided that the Transfer of Undertakings (Protection of Employment) Regulations 2006 applied to the transfer; and employees that were made redundant after 1 March 2020 but prior to the CJRS provided such employees were reemployed, furloughed and not worked for the employer during this period.
For new starters starting after 28 February 2020, as the key question under the CJRS is whether the employee was on the PAYE payroll on 28 February 2020, the scheme is unlikely to apply to new starters not on their employer’s PAYE payroll by this cut-off date.
Are workers or other non-employees eligible to claim under the CJRS?
The guidance confirms that the scheme is available to the following categories provided that they are paid through PAYE:
Those who pay tax through Income Tax Self-Assessment would not be eligible but may qualify for a Self-Employed Income Support Scheme.
Can employers choose which staff to place on furlough and which to ask to come into work?
The guidance published suggests that it will be for the employer to designate staff as furloughed in which case the choice of who to place on furlough will be essentially one for the employer to make. Any such decision will be subject to employment law principles such as equality and discrimination law. It would be sensible when making the choice to take into account the personal circumstances of each individual member of staff and avoid potential discriminatory criteria and reasons. Those with caring commitments for example might find it much harder to continue working - even from home – than those without. Ultimately however the employer will be able to make its decision based on the needs of the business ensuring that it retains access to the skills and experience that it needs to continue operating as best it can.
What wages will it cover and how will wages be calculated?
The scheme covers 80 per cent of wage costs to a maximum of £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Discretionary commission or bonuses (including tips), non-cash payments or benefits in kind are not recoverable.
The CJRS guidance makes it clear that all of the grant received to cover the subsidised furlough pay must be paid to the individual member of staff in the form of money. No element of the grant should be netted off to pay for benefits or a salary sacrifice scheme.
The amount payable will be based on the employee’s normal salary. Where the pay is variable then the employer can claim for the higher of either the same month’s earnings from the previous year or the average monthly earnings from the 2019-2020 tax year. Where the employee has been employed for less than a year, the employer should take an average of their earnings since they started work. For an agency worker, wages would be calculated based on the either the earnings in the corresponding month of 2019 or on the basis of average earnings in the last tax year. It would not be dependent on the pay the worker was receiving in the most recent assignment.
Does the CJRS only apply if an employer does not pay wages – or will an employer be able to recover wages that have already paid?
The scheme is intended to help those employers who have chosen to keep staff on the books rather than make them redundant. We can certainly expect that it will refund employers who have already been paying staff from 1st March 2020 provided that they have not been doing any work in that period.
The CJRS does not pay all of an employee’s wages – do employers have to top up their pay to the full amount?
The guidance says that this is voluntary – but it is in reality a matter for the contract of employment. In most cases, the employer will be under an obligation top up their pay unless the employee agrees to a temporary reduction in wages so that the amount paid by the CJRS represents the full amount to which the employee is entitled.
Does an employer have to place all of its employees on furlough, or can it be selective?
It is clear that the CJRS does not envisage an ‘all or nothing approach’. Some employers will need to maintain a skeleton staff even if the majority of their operations are shutting down. Some will only need to send a relatively small proportion of their employees home while other parts of the business carry on almost as normal. It is clear that employers and employees will be able to benefit from the scheme in either scenario.
Can staff be furloughed, brought back to work and then furloughed again?
The guidance makes it clear that the minimum period for which staff may be furloughed to take advantage of the scheme is three consecutive weeks. If they return to work, they must be taken off furlough. Staff can be furloughed multiple times but each separate period of furlough must be for a period of three consecutive weeks.
Can we place sick employees on furlough or do we have to keep paying them SSP?
Sickness and self-isolation should not be a consideration for employers deciding whether to furlough staff. Employers must be careful not to discriminate. However, if an employer wants to furlough employees for legitimate business reasons and those employees are off sick, the employer is able to furlough those employees as with other employees. Under such circumstances, the employee should not receive SSP and instead would receive furlough pay and be classed as a furloughed employee.
What if a furloughed employee becomes sick?
No guidance has been provided on the obligations of an employee to notify their employer if they are sick during any period of furlough leave nor is there any guidance that an employer is obliged to notify HMRC if a furloughed employee becomes ill. However, the CJRS does make clear that a furloughed employee retains their statutory rights which includes right to SSP. This means that furloughed employees that become sick must be paid at least SSP. It is up to the employer to decide whether to move these employees on to SSP or keep them on furlough, at their furlough rate of pay.
Could someone return early from maternity or adoption leave to benefit from the furlough scheme?
It seems that they could. The operation of maternity and other forms of family-based leave is unaffected by the furlough scheme. An employee on maternity or adoption leave can return to work early provided she gives the employer eight weeks’ notice of the early return (or shorter, if both sides agree). The employer would then be free to place the employee on furlough from the date of her return. Employees should bear in mind, however, that the employer is not necessarily obliged to place them on furlough and may instead find work for them to do.
Does annual leave accrue during furlough and can annual leave be carried over?
There is no CJRS guidance on accrual of annual leave but the generally accepted position is that annual leave will continue to accrue during furlough. In terms of carry-over, the Working Time (Coronavirus) Amendment) Regulations 2020 allow carry-over of up to four weeks annual leave into the next two leave years where it was not reasonably practicable for staff to take their leave because of coronavirus.
Can an employer instruct staff to take annual leave if it cannot offer them work?
Under the Working Time Regulations an employer can instruct its staff to take annual leave by giving notice that is at least twice the duration of the leave that must be taken. So if the employer wants the employee/worker to take two weeks’ of annual leave entitlement then it must give the employee/worker four weeks’ notice of this. There is of course nothing to stop employers and their staff from agreeing that any given period without work should be treated as annual leave – although the terms of the CJRS will reduce the incentive to reach agreements of this sort.
Can an employer instruct staff to take annual leave while they are on furlough?
There is conflicting information on whether taking annual leave at the same time as being furloughed would interrupt the minimum three week furlough leave period needed under the CJRS in order to claim. The most recent ACAS guidance indicates that annual leave can be taken during periods of furlough leave but it must be noted that the ACAS guidance is not binding and has changed on a number of occasions. The Government have not issued guidance on this point and as such, this issue remains unresolved.
How does an employer stop too many staff taking what is left of their annual leave later in the year?
The Government has amended the Working Time Regulations to allow employees/workers who have been prevented from taking their basic four-week annual leave entitlement to carry over that leave for up to two years. Where it is not reasonably practicable for staff to take their full entitlement this year, therefore, they will be able to defer their remaining leave to next year. The additional leave of 1.6 weeks must still however be taken in the current holiday year.
The Regulations also make it clear however that the employer can only defer the request to take annual leave where it has ‘good reason’ to do so. While a rush in demand for leave towards the end of the year may well satisfy this requirement, the employer should make every effort to accommodate requests for leave where possible.
Does the prospect of the furlough scheme make it unfair to make employees redundant?
The CJRS does not in itself protect employees against redundancy but the scheme will certainly be a relevant consideration. There may well be circumstances in which any reasonable employer would conclude that the job retention scheme means that there is no need to make employees redundant. The extent to which the employer could recover its wage costs by placing employees on furlough will certainly affect the reasonableness of any decision to proceed with redundancies.
Can employees be furloughed during their notice period?
There is nothing in the scheme to prevent this but there is no incentive for an employee working out their notice period to be furloughed unless their pay will remain at 100 per cent.
What are the rules of the CJRS whilst the employee is on furlough?
The CJRS guidance states that once on furlough the employee cannot undertake any work for the employer but there is no restriction on the employee working for another employer, so long as their contract of employment allows. For any employer that takes on new employees, the new employer should ensure they complete the HMRC starter checklist form correctly. If the employee is furloughed from another’s employment, the new employer should complete Statement C.
The employee can undertake training or volunteer subject to public health guidance, as long as the employee does not generate revenue for the employer or any company linked or associated with the employer; or provide services to the employer or any company linked or associated with the employer.
Information correct as at 8 April 2020