Coronavirus Job Retention Scheme and furloughed workers - what you need to know

Correct as at 27 March 2020

The Coronavirus Job Retention Scheme, announced by the Chancellor, is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020. It is designed to support employers whose operations have been severely affected by coronavirus.

The Government issued guidance on the rules applicable to the scheme on 26 March. This is an overview of the scheme, which reflects the detail provided thus far.

If the employer “cannot cover staff costs due to COVID-19”, they may be able to access support to continue paying part of your wage, to avoid redundancies. See here.

There will be an online portal run by HMRC in order to submit the relevant information about furloughed workers (FW) those who have been placed on a leave of absence. It is anticipated that this will be up and running by the end of April.

Who can claim

Any UK organisation with employees can apply, including:

• businesses
• charities
• recruitment agencies (agency workers paid through PAYE)
• public authorities

An organisation also must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.

Public sector organisations

The government has stated its expectation that the scheme will not be used by many public sector organisations and where employers receive public funding for staff costs, and that funding is continuing, they expect employers to use that money to continue to pay staff in the usual fashion – and correspondingly not furlough them.

This also applies to non-public sector employers who receive public funding for staff costs.

Employee Eligibility and Eligible Costs

Furloughed employees must have been on 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 on flexible or zero-hour contracts

The scheme also covers employees who were made redundant since 28 February 2020, if they are rehired by their employer. While on furlough, the employee’s wage will be subject to usual income tax and other deductions.

For those employees, employers can use the portal to claim for 80% of furloughed employees’ 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.

The employer can choose to fund the differences between the government grant payment and salary, but does not have to. This also applies if 80% takes an employee below the National Minimum or National Living Wage.

Fees, commission and bonuses should not be included in the calculation. However if employees have variable pay i.e. are paid hourly and work varying hours each week, then if the employee has been employed for a full twelve months prior to the claim, employers can claim for the higher of either:

• the same month’s earning from the previous year
• average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, employerss can claim for an average of their monthly earnings since they started work.
All employers remain liable for associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees.

Applying and selecting for FW status

In terms of applying the CJRS, the key will be to identify how many staff you need and can afford, and thereafter devise an appropriate scheme of selecting staff to furlough.

Even in these unprecedented times, there is a need to avoid the risk of claims arising, particularly given that furloughed workers, whilst paid to sit at home, will have time on their hands. Any selection process that would, therefore, breach protections for employees around equalities, or protections around part-time or fixed term status, would need to be guarded against.

Absent anything published to the contrary, it may be preferable to seek volunteers (albeit within categories of workers who you would be looking to furlough).

You would also, try to seek agreement with staff selected, that they will agree to be furloughed. The reason you would wish to record an agreement with the employee as to their furloughed status, is to avoid anyone trying to sue in due course for the 20% of wages they have not been paid. We have never known a scheme like this and so it is not clear how employees and indeed the tribunals will respond to claims or disputes concerning the FW concept further to the CJRS. Employees once selected must be furloughed for a period of at least three weeks.

Terms during and after FW leave

Employees that have been furloughed have the same rights as they did previously. That includes Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.

To be eligible for the subsidy, when on furlough, an employee can not undertake work for or on behalf of the organisation. This includes providing services or generating revenue.

HMRC – What you’ll need to make a claim

To claim, you will need:

• your 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 3 weeks)
• your bank account number and sort code
• your contact name
• your phone number

You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim.

You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Claims can be backdated until the 1 March if applicable.

Get in touch

If you’ve any queries about this, or any other employment related matter that could affect your business, our team of specialist employment lawyers can assist. Please contact us on 0131 247 2534 to discuss further.