Last updated: 6th April 2020
Current Position :
The Government has put forward measures to help businesses ride out the economic crisis created by Covid-19. The Coronavirus Job Retention Scheme is an important part of the Government’s plan to support employers whose operations have been severely affected by coronavirus.
On the 4 April 2020, the government and HMRC released further information on the Coronavirus Job Retention Scheme (here). This guidance note covers some of the practicality around how it will work in practice.
The overall objective is to keep people at home while enabling employers to retain staff who will be needed when they begin to rebuild their businesses in the future.
Who is eligible for the scheme?
All UK businesses are eligible.
Furloughed employees must have been on your PAYE payroll on 28 February 2020, and can be on any type of contract, including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees/workers on flexible or zero-hour contracts
- agency workers
What we Know About the Furlough Leave Scheme
- Employees must be placed on ‘furlough’ leave rather than dismissed. ‘Furlough’ means “give a leave of absence to” and is not a term which has previously had any specific meaning in UK employment law. It came about following the government’s announcement on Friday 20 March 2020.
- 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.
- Employers can claim for wages, past overtime, fees and contractual commission payments (from past sales). However, discretionary bonuses including tips,commission and non-cash payments / benefits should be excluded.
- The scheme pays a grant (not a loan) to the employer.
- Furloughed members of staff must not work for the employer during the period of furlough.
- It will last for at least 3 months and will be extended if necessary.
- If an 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.
- Employees on sick leave or self-isolating should get Statutory Sick Pay, but can be furloughed after this.
- Employees who are shielding in line with public health guidance can be furloughed.
- Furlough is from 1 March 2020, so is to be backdated. However, an employer will only be eligible to claim the grant once they have agreed the furlough with their staff and staff have stopped working for the employer.
- The scheme also covers employees who were made redundant or have left since 28 February 2020, if they are rehired by their employer and placed on furlough.
- An employee must be on furlough for at least three weeks to be eligible to reclaim monies back. An employer is permitted to rotate furlough leave amongst employees, provided each employee is off for a period of at least three weeks.
- An employer can top up the 80% to 100% but does not have to subject to anything in the contract specifying otherwise or agreed.
- The 80% that can be claimed back under the scheme relates to an employee’s wages only. Therefore, an employer could make ‘furlough’ subject to other conditions such as a reduction or removal of benefits. Examples include contractual holiday entitlement (over and above statutory entitlement), car allowance, bonuses etc.). It is important to make this clear when requesting an employee agree to be furloughed.
- If 20 or more staff are proposed to be ‘furloughed’, it may be necessary to engage collective consultation processes to seek agreement to changes to terms of employment.
- Apprentices can be furloughed and continue with their training. However, they must be paid at least the Apprentice NMW for any training. This means the employer must cover the shortfall between what they can claim through the Scheme and NMW.
- An employer can claim for employees on unpaid leave only if they started that unpaid leave after 28 February 2020.
- Employees with caring responsibilities who are unable to work due to Covid-19 can be Therefore, this will include employees on dependant’s leave due to the closure of schools.
- Employers can claim for any enhanced earnings for maternity leave, paternity leave, adoption leave and shared parental leave (over and above statutory payments) under the scheme.
- Confirmation of any furlough leave should be in writing and the records kept for a minimum period of 5 years.
Frequently Asked Questions
- How do you calculate a week’s pay if people don’t work regular hours e.g. irregular or casual hours?
For employees whose pay varies, the employer can claim for the higher of (i) the same month’s earning from the previous year (eg earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year.
- What about rotating staff on weekly patterns of furlough?
This would not be allowed since employees must be on furlough for at least three weeks for eligibility under the scheme.
For more FAQs, see our dedicated Furlough Leave – FAQs page here.
How to Apply
Submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal which is to be set up.
Employers will need to calculate the amount they are claiming. HMRC will retain the right to retrospectively audit.
Employers can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for.
Further details of the scheme will continue to emerge over the next few weeks.
Placing an employee on “furlough” leave will need to be done in accordance with their contract of employment and UK employment law. It is also something for the employer to decide and not the employee to demand although employers should be mindful unreasonable decisions could lead to claims such as constructive dismissal.
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. Therefore, employers should avoid picking individuals purely based on protected characteristics like age or health conditions which could amount to disabilities.
The scheme specifically states that “changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation.” It is extremely unusual for an employer to have a contractual right to put an employee onto this scheme, therefore in the vast majority of cases, it will need to be agreed with the employee.
In most circumstances the employee is likely to agree to be placed on the scheme. If the employee does not then the employer may be left to consider other options such as ‘lay-off’ or even redundancy.
The scheme is meant to preserve employment and support businesses and employees alike. The scheme is beginning to look increasing more complex as time passes and further information will no doubt be released over the coming days and weeks. It is important to be clear on your reasons for ‘furlough’ and eligibility under the scheme. Employers should discuss furlough with their employees to get their agreement and failing this seek specialist advice on their available options.