Author: Ruth Christy
The situation with regard to government support and action is changing daily. Please contact one of our employment team lawyers for the latest position with regard to your own situation.
What is the Coronavirus Job Retention Scheme?
The Government has pledged a grant of 80% of pay for certain employees under a scheme known as the Coronavirus Job Retention Scheme (CJRS) – or, "furlough".
With an emergency national lockdown announced on Monday 23 March, the financial measures and support announced by the Government have become even more important for an organisation's capacity to survive the COVID-19 crisis.
Government guidance provides more clarity
Employers were left with many questions following the Chancellor's initial announcement about the Coronavirus Job Retention Scheme (CJRS). Many of these have now been answered with the publication of government guidance on 26 and 27 March:
- New guidance on Coronavirus Job Retention Scheme published
- Check if your employer can use the Coronavirus Job Retention Scheme
- Claim for your employee’s wages through the Coronavirus Job Retention Scheme
Which employers can use the Coronavirus Job Retention Scheme?
"All UK employers will be able to access support to continue paying part of their employees’ salary for those employees that would otherwise have been laid off during this crisis".
All employers are eligible for the grant - and it is clear from the government guidance that it is a grant and not a loan. The scheme is very comprehensive and covers all UK employers that had created and started a PAYE payroll scheme on 28 February 2020 and have a UK bank account. This includes businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities.
Who may be put on furlough?
The intention of the scheme is clearly to save jobs. We know that the scheme will run from 1 March for an initial period of three months for those on the employer's PAYE on 28 February 2020.
Significantly, the scheme also covers employees who were made redundant since 28 February, if they are re-hired by their employer.
This means that pay can be backdated to 1 March for those furloughed. If they were furloughed after 1 March, remember that the scheme only applies to them from the date they were furloughed and that the three month period of the scheme runs from 1 March (not three months from when they are put on furlough).
What do employers need to do to put an employee on furlough?
The guidance says that employers will need to "designate affected employees as ‘furloughed workers,’ and notify employees of this change - changing the status of employees remains subject to existing employment law and, depending on the employment contract, may be subject to negotiation".
This raises a couple of issues:
- The concept of "furlough" does not exist in the context of UK employment law.
The reference to existing employment law is likely to mean changes to terms and conditions and seeking employees' agreement to be designated as furloughed workers.
Faced with the alternative of receiving no pay or being made redundant, it is likely that many employees will agree to furlough leave as a (hopefully) temporary change. However, this should be approached with caution. There may be some employees who would be entitled to a hefty redundancy payment and prefer that alternative, or high earners whose contractual termination rights would lead them to reject the furlough option.
The way it is presented to staff is key, and you should consider the cost if certain employees were to reject it, and therefore whether to offer it in the first place (subject to normal redundancy-type criteria).
Since the condition is that they would otherwise have lost their jobs, it could be difficult to refuse redundancy for a person who has rejected the furlough option, although it would of course be necessary to have followed a fair redundancy dismissal process before making any redundancies, including collective consultation where this is required. On the other hand, making people redundant without offering them the furlough option could well be deemed an unfair dismissal.
- The wording of any communication to employees should be carefully drafted.
Now we know about the scheme, what its parameters are in terms of exact pay rates, and when the first payments will start coming through (unlikely to be before the end of April), letters to employees should refer to the CJRS scheme and some key points (such as the fact that the employee cannot do any work during the furlough period).
- Normally there is an obligation to collectively consult over changes to terms and conditions which involve 20 or more employees at one establishment if non-acceptance could result in their dismissal.
There are differing views currently over whether employers can realistically do that in relation to furlough leave or should attempt to do so in the immediate circumstances they find themselves in. Please speak to us about the risks of not doing this in relation to your organisation's particular circumstances.
- Employment law principles continue to apply and employees. As the concept of "furlough" does not exist in the context of UK employment law, for the purpose of the scheme, being furloughed means an agreed temporary period of absence from work.
Employees who have been furloughed have the same rights as they did previously. These include maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments and annual leave continues to accrue.
What information do employers need to apply for the Coronavirus Job Retention Scheme?
All employers will need to "submit information to HMRC about the employees that have been furloughed and their earnings through a new online portal".
In order to claim, employers will need:
- Their ePAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- The amount claimed (per the minimum length of furloughing of 3 weeks)
- Their bank account number and sort code
- Their contact name and phone number
Employers will need to calculate the amount they are claiming and HMRC will retain the right to retrospectively audit all aspects of their claim.
Employers can only submit one claim at least every three weeks, which is the minimum length of time an employee can be furloughed for.
What will be paid for employees on furlough?
Employers will receive a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer NICs and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
In the guidance published on 27 March, the Government confirmed that the costs of Employer NICs and pension contributions will be covered. It says that this could save businesses an extra £300 a month for each employee under the scheme. Employers must be clear that it is their responsibility to pay employees and seek reimbursement from HMRC. HMRC will not be making payments to employees. As the system is going to take some time to get running, this could mean businesses face difficulty with initial wage costs. However, employers are still under an obligation to pay staff or get their agreement to defer payment of wages until the reimbursement scheme is up and running.
In the COVID-19 Guidance for Employees it states that "Your employer could choose to fund the differences between this payment and your salary, but does not have to." There is no obligation on employers to make up the difference. This is very much a decision for individual employers.
Can employees work whilst being furloughed?
In the COVID-19 Guidance for Employees, it states, "To qualify for this scheme, you should not undertake work for them while you are furloughed."This statement seems very clear and it is a key principle of the scheme that the individual cannot do any work for their employer whilst furloughed. They can take part in volunteer work or training as long as this does not provide services to, or generate revenue for, or on behalf of their employer.
The Employee Guidance states that an employee can be put on furlough by one employer and continue to work for another, if it is permitted within their employment contract. If the 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.
Can an employer call back an employee from the furlough scheme as and when they need them, and then put them back on furlough when they do not?
Yes, subject to the three week minimum period referred to above. It is possible that those who are not furloughed may contract COVID-19 and employers will then need staff to cover their absence. It would also help share the workload and loss of pay between staff in a fair way, in addition to allowing staff to retain skills rather than losing them if they are off work for several months.
Other issues to consider
- Although the guidance does not expressly state this, furlough leave is distinguished from annual leave and it is unlikely that an employee can take some of their paid holiday entitlement whilst on furlough.
- Details of how to calculate pay for those on variable hours is included in the guidance. Where the employee has been employed for a full twelve months, employers can claim for the higher of either the same month’s earning from the previous year or average monthly earnings from the 2019-20 tax year. If the employee has been employed for less than a year, employers can claim for an average of their monthly earnings since they started work.
- Employees on sick leave or self-isolating are not furloughed and they should receive Statutory Sick Pay. They can however be furloughed after returning from sick leave or when the period of self-isolation has ended.
Although we now have guidance for employers and employees there are still likely to be many potential questions in the weeks ahead about how the scheme will operate. Please do not hesitate to contact one of our employment law experts about furlough and the Coronavirus Job Retention Scheme or any other employment-related queries raised by the COVID-19 crisis. Our Blake Morgan colleagues also remain on hand to advise your business generally and we can put you in touch with the right person for any other queries.
