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Coronavirus Job Retention Scheme - FAQs for Employers

Coronavirus Job Retention Scheme - FAQs for Employers

Frequently Asked Questions


What is the Government's Coronavirus Job Retention Scheme?

The Job Retention Scheme ('the Scheme') is an unprecedented Government initiative designed to help employers with the impact of the coronavirus pandemic. The purpose of the Scheme is to provide employers with financial assistance during this uncertain economic time, and also to maintain job security and a certain level of income for staff whose jobs may otherwise be affected as a result of the coronavirus (COVID-19) pandemic.

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How long is the Scheme in place for?

The Scheme is in two phases and the total duration of the Scheme is eight months from 1 March 2020  to 31 October 2020. Phase 1 of the Scheme will close on 30 June. Phase 2, (incorporating a more flexible approach to furlough) runs from 1 July until 31 October 2020. More details of the new flexible furlough arrangements are set out below.

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What financial support is currently provided under the Scheme?

Until 1 August 2020, employers can claim up to 80% of a furloughed employees' wage costs, subject to a £2,500 monthly cap. Employer National Insurance and pensions auto-enrolment costs can also be claimed until 1 August 2020. The guidance states that employers can claim for any regular payments which may include wages, past overtime, fees and compulsory commission payments. However, discretionary bonus (including tips), commission payments and non-cash payments should be excluded.

In relation to calculating how much can be reclaimed different rules apply depending on whether the employee has a regular salary or variable pay:

  • Where the employee has regular pay, the claim should be based on their last pay period prior to 19 March 2020.
  • Where the employee has variable pay, then employers can claim the higher of:

- the same month's earnings for the previous year; or

- average monthly earnings for the 2019/2020 tax year.

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How is the available financial support changing under Phase 2 of the furlough Scheme?

Flexible furloughing will be introduced from 1 July 2020. For the month of July, the financial support available under the Scheme remains at its current levels. From 1 August, employers will no longer be reimbursed the cost of employer National Insurance and basic pension contributions on the furlough payment and will be responsible for these payments. Thereafter, the amount of the Government contribution will taper with a corresponding increase to the employer, as follows:

 

August

September

October

Employer contribution: wages

--

10% up to £312.50

20% up to £625

Government contribution: wages

80% up to £2,500

70% up to £2,187.50

60% up to £1,875

Employee receives

80% up to £2,500 per month

80% up to £2,500 per month

80% up to £2,500 per month

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What else is changing under the new flexible furlough scheme?

From 1 July 2020, staff will be able to be flexibly furloughed, which means they will be able to work part-time and be furloughed part-time, according to any pattern agreed between the parties. The current three week minimum furlough period will be removed, giving maximum flexibility to employers and employees to agree working arrangements to suit.

From 1 July 2020 employers will be limited to furloughing no more than the maximum number of staff they have furloughed in any claim made between 1 March and 30 June 2020. This is in order to support the wider aim of winding down the Scheme and gradually bringing more people back to work.

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Which employers can access the Scheme?

All UK employers, including businesses, charities, recruitment agencies (where agency workers are paid through PAYE), and public authorities, are technically eligible for the Scheme if they have:

  • furloughed staff for the first time on or before 10 June 2020,
  • started a PAYE payroll scheme on or before 19 March 2020,
  • enrolled for PAYE online,
  • a UK bank account,
  • submitted a report under the Real Time Information (RTI) reporting system for furloughed employees on or before 19 March 2020.

The Government has said it does not expect the Scheme to be used by many public sector organisations as the majority continue to provide essential public services or are contributing to the response to the pandemic.

The Government has also confirmed that where a public authority is in receipt of funding for staff costs, the expectation is for that money to be used to pay wages in the usual way.

We anticipate that any public authority seeking to use the Scheme will be expected to justify its reasoning as the Government will wish to avoid effectively paying twice for staffing costs.

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Can employers make use of the Scheme in relation to new staff?

When the Scheme was announced, it was only available in relation to employees who were enrolled on the payroll on or before 28 February 2020. This was intended to be an anti-fraud measure. However, the Government has since extended the Scheme and confirms the Scheme is open in relation to employees on the PAYE payroll on or before 19 March 2020, (provided they were notified to HMRC on an Real Time Information (RTI) submission on or before 19 March 2020)  In effect, this means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020 in order for staff to qualify.

The guidance confirms that the Scheme is available to staff who have been transferred to a new employer under TUPE or business succession rules.

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Which categories of staff can benefit from the Scheme?

The Scheme is open to fixed term or permanent staff on "any type of contract" including:

  • full-time employees,
  • part-time employees,
  • employees on agency contracts,
  • employees on flexible or zero hours contracts.

The guidance also confirms certain workers are eligible for the Scheme as long as they are paid through PAYE.

Foreign nationals on work visas are also entitled to access the Scheme subject to the requirements above. Funding under the Scheme is not classified as "recourse to public funds" for the purpose of visa restrictions.

The Scheme can also be used in relation to apprentices who may continue to train whilst they are on furlough, provided that they are paid at least the Apprenticeship Minimum Wage/National Living Wage/National Minimum Wage (as applicable) in relation to time spent training.

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Can staff who were on statutory family leave on 10 June 2020 be furloughed for the first time after the normal cut-off date?

Yes, this is permitted for staff who were on statutory family leave (such as maternity or paternity leave) on 10 June 2020. In these cases, staff can be furloughed for the first time after 10 June 2020 so long as their employer has used the Scheme between 1 March and 30 June 2020.

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Can staff who have previously been furloughed commence a new period of furlough leave between 11 - 30 June 2020?

Yes, this is possible. The current three week minimum furlough period will continue to apply for any furlough leave commencing between 11 - 30 June 2020, even if this means extending the three week period into July.

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How will the Government pay staff salaries under the Scheme?

The Scheme was initially established to reimburse employers for salary costs, meaning employers would need to initially fund staff wages, and then claim under the Scheme. Following reports that this could lead to cashflow and liquidity problems for a large number of employers, the Government amended the Scheme so that it is now possible to claim the money from HMRC before then paying furloughed staff salaries.

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Are employers obliged to make up the shortfall between the Government contribution and staff's usual salaries?

No, there is no obligation to make up the shortfall in furloughed staff salaries, subject to the mandatory employer contributions which will come into effect on 1 July 2020.

There are different factors which will be relevant for employers who are considering whether to pay furloughed staff at the 80%, 100% or somewhere in between. Where there is a reduction in pay this should be with agreement. Employers may choose to make up the salary shortfall in order to mitigate the risk of claims, for example claims for breach of contract. However, thought should be given to the perceived unfairness of a scenario where furloughed staff and those who are required to continue to work, are in the same financial position.

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Must employees agree to be furloughed under the Scheme?

The Government issued a Treasury Direction on 20 May 2020 confirming that in order for an employee to be furloughed the employer and employee must have agreed that the employee will cease all work in relation to their employment. The agreement must either be made in writing between the parties or confirmed in writing by the employer, and the agreement can be in electronic form such as email.    

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How do employers make a claim under the Scheme?

Phase 1 of the Scheme will close to new entrants from 30 June 2020. This means in order to furlough staff for the minimum three week period by the time Phase 1 closes, all staff will have to be furloughed for the first time by 10 June 2020. The guidance confirms employers will have until 31 July to make claims in respect of the period to 30 Jun 2020. Claims are made online and there is guidance for employers on the HMRC website.

The guidance is clear that employers (or agents on their behalf) must calculate the amount they are claiming and that HMRC may audit these calculations in due course.

Employers should ensure full and accurate records of such calculations are retained. Written documentation (ideally being an agreement between employers and employees relating to furlough) should also be retained for at least five years.

The Treasury Direction specifies that payments received under the Scheme must be shown in Company accounts.

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Can we rotate staff between furlough and working status?

The guidance expressly confirms employees can be furloughed multiple times, subject to the three week minimum furlough period under Phase 1 of the Scheme. From 1 July, the three week minimum furlough period will be removed, but again there is no limit to the number of times employees can be flexibly furloughed so long as the eligibility criteria above are met. This means that under both phases 1 and 2, employers can choose to rotate staff between furlough and working status if desired.

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How do we extend staff who are on furlough?

Employers may need to update staff to advise them if they intend to retain them on furlough for longer than originally anticipated.  The format of any extension is likely to depend on the wording of the original letter. In most cases it will be sufficient to let staff know it will continue on the basis of the current agreement, unless they raise any objections. If employers want to introduce part time working and part time furlough then the agreement may need to be revised to allow for this.

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How do you bring staff back from furlough?

As workplaces re-open it and lock down is eased staff may need to return to the workplace. There are no specific notice requirements to bring furlough to an end and staff are expected to be available to return to work when requested to do so. It may be helpful to make staff aware of this so they can start making their own plans in anticipation of this.

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Can furloughed staff be called upon to perform any work during the furlough period?

No, this is not possible under the current Scheme. Any employee who is furloughed should not perform any work for their furloughing employer (or any linked or associated organisation) whilst they are on furlough leave. They are however entitled to perform voluntary work and/or complete training. Company directors can continue to perform limited duties and pension scheme trustees can continue to administer pension schemes.

The guidance also confirms that subject to any contractual requirements in place, employees may take a second job with another employer whilst furloughed.   

The guidance does not deal with employees who may have two contracts of employment for the same employer but as it expressly states that employees should not work for the employer, we consider the safest approach in this scenario would either be to furlough the employee from both roles or neither.

From 1 July 2020 staff will be able to work on a part-time basis under Phase 2. However they remain subject to the requirement not to perform work for the employer during the time recorded as being on furlough leave rather than working.

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We have a number of staff on sick leave or self-isolating and unable to work from home. Can we furlough these staff?

In relation to staff who are in the extremely vulnerable category and so shielding, it is a matter for the employer whether they are placed on furlough or alternatively treated as sick. If treated as sick they will be deemed to be eligible for statutory sick pay (and as such are also likely to satisfy the requirements for any enhanced sick pay).

Staff who are staying at home with someone who is shielding, or who have caring responsibilities, can also be furloughed if desired.

Where staff are on sick leave or self-isolating, the employer and employee can agree the date the employee's period of incapacity for work will end for SSP purposes. This will allow parties to reach an agreement to end sick leave in order for the individual to move onto furlough leave.

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What happens if an employee who has been furloughed subsequently falls sick?

The guidance confirms furloughed employees retain their SSP entitlement. Most employers will keep these staff on furlough but they could be moved over to sick leave.

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How does the furlough period interact with annual leave?

Employees who are furloughed continue to be employed and will therefore continue to accrue annual leave. It is also possible to take annual leave during furlough without disrupting the furlough period. Employers can require staff to take annual leave by complying with the usual Working Time Regulations notice requirements.

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The above reflects guidance as at 16 June 2020. We will continue to update this as the situation develops.


If you have further questions in relation to how the Job Retention Scheme will impact your organisation, please contact Gareth Edwards on 0117 314 5220, or complete our contact form below.

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Our employment lawyers based in London, Watford, Bristol and Birmingham provide specialist legal advice and support to employers of all sizes and in all sectors.

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