*Including updates correct as of 4th May 2020.
On the 20th March 2020, the government introduced the Coronavirus Job Retention Scheme (CJRS) to provide grants to employers to enable them to retain employees despite the effects of COVID-19. Under the Scheme, government will cover 80% of an employee’s salary, up to £2,500 per month. The online claims portal went live on the 20th April 2020, but claims can be backdated to the 1st of March 2020.
In this article, Michelle Tyson, Director of recruitment agency, Tyson Wilson Limited, provides answers to some frequently asked questions about the scheme.
Michelle said: “The coronavirus pandemic is unprecedented and is having significant impacts on businesses across all sectors in the UK. The government have introduced a range of measures to help businesses and employees, one of which is the Coronavirus Job Retention Scheme.”
“Under the Scheme, employees are designated as ‘furloughed’. This is a new term in UK employment law, describing a situation where an employee remains employed – with all associated employment rights – but is not permitted to carry out work or provide services to the employer who has furloughed them. Interpreting guidance based on individual circumstances can be tricky, so we’ve tackled some of the most frequently asked questions to hopefully shed some light on the Scheme’s criteria.”
What period does the Scheme cover?
On the 20th March 2020, the Chancellor announced that the CJRS would cover the period from the 1st of March 2020 to the 31st of May 2020. On the 17th of April 2020, the Chancellor announced that the Scheme would be extended until the 30th of June 2020.
Michelle adds: “Employers can use the Scheme at any time during the period it is open. To be eligible for a claim, an employee must be furloughed for a period of at least 3 weeks. Where an employee is furloughed, taken off furlough, and put back on furlough again – each period of furlough must last for at least 3 weeks to be eligible.”
Who is eligible under the Scheme?
Any employer who has set up a PAYE scheme and notified this to HMRC through a real time information (RTI) submission by the 19th March 2020, and who has a UK bank account, is eligible to make a claim. Any employee who was employed on or before the 19th March 2020 and who was on the employer’s payroll on or before the 19th March 2020 can be claimed for.
Michelle said: “The Scheme is broadly inclusive. Employers can claim for full and part time employees, employees on a fixed term or temporary contract, apprentices, zero-hour contract workers, agency workers, and company directors who are paid – at least in part – through PAYE. In the case of company directors, dividends are not taken into consideration and directors can continue to carry out their statutory duties.”
What can employers claim?
Employers can claim for 80% of an employee’s salary, up to a maximum of £2,500 per month, per employee. For salaried employees who receive the same wage every month, this is a straightforward calculation. However, for employees whose monthly pay varies, employers can claim for either the amount earned in the same month last year, or an average of the employee’s monthly earnings from this year, whichever is highest. The calculation should include any regular payments made that are non-discretionary, such as overtime, fees, commission, and piece rate payments.
In addition, employers can claim for Employer National Insurance Contributions (NICs) and auto-enrolment pension contributions at the minimum rate (3%) for the amounts payable through the Scheme.
Michelle adds: “Employers cannot make deductions from the amount claimed for an employee, for example, as an admin fee. Employees should receive the total amount that has been claimed on their behalf, after normal deductions for things like income tax, employee pension contributions and national insurance contributions, and student loan payments, where applicable. However, employers can choose to ‘top-up’ employee wages to the regular amount but are under no obligation to do so. Where an employer does top-up employee wages, they are also eligible to pay any additional NICs and pension payable for the increased amount.”
Do employers need to prove they cannot otherwise pay employees?
Michelle explains: “In previous versions of the government guidance, there was uncertainty over whether employers could only furlough workers if they would otherwise have had to make them redundant. The Treasury Direction makes it clear that this is not a requirement.”
The guidance now states that “all employers are eligible to claim under the scheme and the government recognised different businesses will face different impacts from coronavirus”.
In addition, the guidance states that employees who were made redundant or stopped working for their employer after the 28th February 2020 can be re-employed and placed on furlough. This applies even if the person is re-employed after the 19th March 2020, provided they were on payroll on or before the 28th February 2020. Employees who were made redundant or stopped working for their employer after the 19th March 2020 can be re-employed and placed on furlough, provided they were employed and on payroll on or before the 19th March 2020.
How do employers place employees on furlough?
Michelle said: “There is some contradictory advice regarding how the furlough process works. However, employers must always be mindful that employees are placed on furlough in accordance with existing employment law. In addition, being placed on furlough is likely to result in a temporary variation to the Contract of Employment – for example, reduced wages and reduced employer pension contributions.”
“For the avoidance of doubt, employees should agree to be furloughed. Employers should set out the terms of the furlough agreement in writing, including an instruction that the employee is not permitted to work for the company while on furlough. The employee should agree to in writing, which may also take the form of a confirmation email. It has been advised that all documentation relating to the agreement of furlough is kept for at least five years.”
Do employees have to be paid at least the National Minimum Wage when on furlough?
No. For the duration of the furlough period, employees are entitled to 80% of their regular wages up to a maximum of £2,500 per month. It is permissible for this to fall under the National Minimum Wage/National Living Wage/National Apprentice Wage for the duration of the furlough period. However, where an employee undertakes training, they must be paid at least the applicable minimum wage rate for those days.
Michelle explains: “For example, you can furlough an Apprentice on 80% of their usual wage, but for days spent training with the college while on furlough – albeit remotely through online learning – they must be paid at least the relevant national minimum wage for those days.”
How should employers choose who to designate as furloughed?
Michelle said: “Where employers designate all employees as furloughed, there will be less complication. However, where employers are operating at reduced capacity, they will need to select which employees to furlough. To avoid direct or indirect discrimination, employers should remember that they are bound by employment law and should apply fair selection criteria.”
Can employees undertake voluntary work, or other paid work, while on furlough?
Yes. In the first instance, employees who work for more than one employer can be furloughed by each employer and receive 80% up to a maximum of £2,500 per month from each employer. In addition, employees who have been furloughed can undertake voluntary work, provided they are not providing services for, or earning revenue for, the employer who has furloughed them. Finally, where the Contract of Employment permits it, a furloughed employee may undertake paid work for another company provided they are not providing services for, or earning revenue for, the employer who has furloughed them.
How does furlough interact with annual leave?
It is important to note that annual leave continues to accrue while an employee is on furlough. In addition, legislation has been amended to allow employees to carry up to 4 weeks of annual leave for the next 2 years. Employees can use annual leave while on furlough without breaking the furlough period, and employers can include annual leave in their claim calculations. However, annual leave during the furlough period should be paid at the employee’s ‘normal rate’, which means employers will need to ‘top-up’ any leave employees take while on furlough.
Michelle warns: “While employers can normally require employees to take annual leave on specific days, such as bank holidays or Christmas closure periods, it is not certain whether employers can require employees to take annual leave during furlough. This issue has not yet been dealt with in guidance.”
Are employers able to proceed with redundancies while employees are furloughed?
Yes. Designating employees as furloughed does not prohibit an employer from continuing with the redundancy process. However, any redundancies will still need to be compliant with employment law.
Michelle adds: “It is worth remembering that in Northern Ireland, employees with one years’ continuous service are protected from unfair dismissal. While redundancy is a potentially fair reason for dismissal, the availability of the CJRS may be a relevant factor in considering whether dismissal was reasonable.”
For more information:
A step-by-step guide for employers claiming employee wages through the Coronavirus Job Retention Scheme is available here –
For the full government guidance for employers, see https://www.gov.uk/guidance/
claim-for-wage-costs-through- the-coronavirus-job-retention- scheme.
A government calculator is also available here – https://www.gov.uk/guidance/
work-out-80-of-your-employees- wages-to-claim-through-the- coronavirus-job-retention- scheme
Note – HMRC retain the right to retrospectively audit all aspects of your claim.