On 20 March 2020, the UK Government announced the largest state economic intervention in peacetime, to prevent hundreds of thousands of employees being placed on lay-off or made redundant. Through the Coronavirus Job Retention Scheme (CJRS), the Government have committed to reimbursing 80% of employees’ wage costs, up to a cap of £2,500 per month. The scheme is open to all UK employers, regardless of size.
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The revised form of CJRS will run for three months from August through to 31 October. From September employers will be asked to pay a percentage towards the salaries of their furloughed staff. The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to a total cap of £2,500 a month.
The Treasury direction has outlined how the scheme will be tapered up to the end of October as follows:
The government will pay 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will pay employer NI and pension contributions and 10% of wages to make up 80% total up to a cap of £2,500.
The government will pay 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will employer NI and pension contributions and 20% of wages to make up 80% total up to a cap of £2,500.
The cap will be proportionate to the hours not worked.
|Government contribution: employer NICs and pension contributions||No||No|
|Government contribution: wages||70% up to £2,187.50||60% up to £1,875|
|Employer contribution: employer NICs and pension contributions||Yes||Yes|
|Employer contribution: wages||10% up to £312.50||20% up to £625|
|Employee receives||80% up to £2,500 per month||80% up to £2,500 per month|
Employers are only eligible to claim under the CJRS scheme now if they have previously furloughed the relevant employee for 3 consecutive weeks before 30 June and have submitted a claim for this by 31 July. There is an exception to this if the employee is returning from statutory parental leave (see below) or is a military reservist.
The amount you can claim for in any single claim period starting from 1 July cannot exceed the maximum number of employees you claimed for under any claim ending by 30 June. For example, if an employer had previously submitted 3 separate claims between 1 March 2020 and 30 June, one for 30 employees, one for 20 employees and one for 50 employees, the maximum number of employees that employer could furlough, in any single claim, starting on or after 1 July would be 50. When employers are calculating the number of employees they can claim for, any employees who are being furloughed for the first time due to them returning from either:
after 10 June, should be added to the previous maximum.
Yes, nothing in the Treasury Directions or HMRC guidance prohibits employees being simultaneously on furlough and on maternity leave. However, this is subject to the following:
HMRC has confirmed that employers can furlough an employee returning from statutory parental leave (including maternity, shared parental, adoption, paternity or parental bereavement leave) after 10 June even if this is the first time that they have been furloughed, provided that:
Where the employee starts a furlough period before 1 July this furlough period must be for a minimum of 3 consecutive weeks. This is the case regardless of whether the 3 consecutive week minimum period ends before or after 1 July.
The guidance states that employees can be furloughed multiple times. Up until 1 July employees had to be furloughed for a minimum period of 21 calendar days. From 1 July there is no minimum furlough period, but the claim submitted to HMRC must still cover a period of at least a week. Employers do not have to furlough all their employees and they can therefore rotate the employees that they place on furlough leave.
Part-time furloughing has been permitted since the 1 July. Working arrangements must be agreed in writing with employees. To calculate payments for flexible furlough, the following approach is advisable:
Employers will need to report and claim for a minimum period of one week.
For an employee on a fixed term contract, provided they were previously placed on furlough for a period of at least 3 consecutive weeks taking place any time between 1 March and 30 June and the employer had submitted a claim for this period by 31 July, the employer can re-employ the fixed-term employee and put them on furlough. If the employee’s fixed term contract has not already expired, it can be extended, or renewed.
Employers can furlough an employee who is a military reservist returning to work after a period of mobilisation that ends after 10 June, even if they are furloughing them for the first time. They may do so if:
The guidance states that foreign nationals are eligible for furlough.
The Government guidance has confirmed that directors, including those who are directors of their own personal service companies, can be furloughed.
Directors can be furloughed but still carry out those duties that are reasonably necessary to fulfil their statutory obligations. If a director delegates work to another member of staff, we believe they would then fall outside of the scheme.It is our view that directors’ duties will be construed narrowly and will include anything which keeps the business running/generates a commercial revenue. If the director engages in activities for shareholders or undertakes any duties set out in their service agreement whilst on furlough leave (with the exception of those that are reasonably necessary to ensure that they fulfil their statutory obligations), they may fall outside the scope of the scheme.
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.However, they must be paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) as appropriate for all the time they spend training. This means that employers must cover any shortfall between the amount employers can claim for their wages through this scheme and their appropriate minimum wage.
Employers can claim a grant for individuals who are not technically employees under employment legislation provided they are paid through PAYE. This can include:
The new Treasury direction permits employees to study or train, if the following 3 conditions are met:
While on furlough, employees who are union or non-union representatives can undertake activities for the purpose of individual or collective representation of employees or other workers and this will not be regarded as undertaking work. However, they must not provide services to or generate revenue for, or on behalf of their employer’s organisation or a linked or associated organisation.Whilst on furlough, employees who are pension scheme trustees or trustee directors of a corporate trustee may undertake trustee duties in relation to the pension scheme. However, a professional, independent pension scheme trustee who has been furloughed by the independent trustee company cannot undertake trustee work that would provide services to or generate revenue for, or on behalf of, the independent trustee company or any organisation linked or associated with that independent trustee company whilst on furloughed.
A new employer is eligible to claim for employees of a previous business transferred if:
The maximum number of employees that the new employer can claim for will be the total of both:
A new employer can also claim for the employees associated with a transfer of a business from the liquidator of a company in compulsory liquidation where:
Revised Government guidance confirmed that if an employee has stopped working for an employer after 28 February, for any reason (e.g. to care for a dependent), the employer can agree to re-employ the employee, place them on furlough leave and claim for their wages from the date on which they were furloughed through the CJRS, provided they meet the eligibility requirement. This applies even if the employer did not re-employ the employee until after 19 March. However, the employee must have been on the payroll as of 28 February and have been notified to HMRC on an RTI submission on or before 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020. If an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer should not re-employ them, put them on furlough and claim their wages under the scheme.
Employees already on unpaid lay off on 28 February 2020 will still be on the payroll and can therefore have their status changed to furloughed worker once their unpaid leave has come to an end.Employees who have been made redundant after 1 March 2020 can be reinstated and placed on furlough.
In our view the PILON can be treated as future salary and the amount paid deducted from their salary for following months as appropriate, depending on the length of the notice period. As PILONs are now treated as an employee’s salary for tax purposes this should not give rise to tax-related issues, but employers should seek advice from their accountants and or HMRC. Reinstated employees can also be offered the opportunity to repay any holiday pay received on termination and then have their holiday entitlement reinstated.
Organisations may be able to make ‘top level’ cuts e.g. reducing or ceasing bonus payments, reducing director/senior management pay, asking employees to volunteer for unpaid leave or reduced pay.
If employers have to make redundancies, they should do so in accordance with the normal redundancy rules and can continue to claim for furloughed employees who are serving a statutory notice period. However, grants cannot be used to substitute redundancy payments. Under new legislation, employees are entitled to receive a statutory redundancy payment and statutory notice pay based on their normal wage and not the reduced furlough rate. The new legislation also covers other employment rights where compensation is calculated using average weekly pay, including compensation for unfair dismissal and short time working.
Employers should be mindful of the CJRS end-date. If an employer is seeking to make 20 or more redundancies, then the consultation period must last at least 30 days. If Employers wish to receive the benefit of the CJRS, and make workers redundant before the scheme ends, they need to act as swiftly as possible.
The Government guidance does not prohibit this or make access to the CJRS conditional upon employers retaining employees once the CJRS ceases.
Government guidance refers to collective consultation potentially being required to obtain consent to the changes being made to terms and conditions where furloughing is proposed, if sufficient numbers of staff will be affected. But given that employers are likely to start with the assumption that all employees will agree to the changes, it is arguably the case that many of them will not at this stage be proposing any dismissals and there is therefore no requirement to consult. There may also be practical difficulties in electing and consulting with employee representatives where places of work have had to be closed.However, if employers are proposing redundancies of 20 or more employees if furloughing is not accepted, or if 20 or more employees raise objections to being furloughed, employers will have to collectively consult.
The updated Government guidance on claiming under the CJRS here states that, ‘To be eligible for the grant employers must confirm in writing to their employee confirming that they have been furloughed’. If this is done in a way that is consistent with employment law, that consent is valid for the purposes of claiming the CJRS. There needs to be a written record, but the employee does not have to provide a written response. A record of this communication must be kept for five years. The new Treasury Direction states that for claims made from 22 May 2020employers must confirm in writing to their employee that they have been furloughed. There needs to be an auditable written record, but the employee does not have to provide a written response to that confirmation that they have been furloughed. As to what this correspondence should contain:
The Government guidance refers to employers being ‘reimbursed’ for 80% of furloughed workers wage costs, up to a cap of £2,500 per month. This suggests that employers will be expected to make the payments first.Employers should therefore ideally pay their employees throughout this period to avoid claims for unlawful deductions from wages and reclaim the payments from HMRC once the portal has opened.Employers who cannot afford to continue to pay wages and need short term cash flow support may be eligible for a Coronavirus Business Interruption Loan (link here).
The Government has confirmed that this is gross pay.
The Government guidance states that if the employee has been employed for 12 months prior to the claim, they are entitled to claim the higher of:
If the employee has been employed for less than the full 12 months, they can claim for an average of their monthly earnings since they started work.
The Government guidance on this point has changed. Previously, it stated that fees, commission, and bonuses should not be included in the calculation of wages. Under the updated guidance you can now include regular payments that you are obliged to pay including past overtime, fees and compulsory commission payments. Additionally, any pay made to employees who undertake additional or exceptional responsibilities should be included. However, discretionary bonuses including tips, commission payments and non-cash payments (such as the value of benefits in kind) must still be excluded from the calculation of wages. Benefits provided through salary sacrifice arrangements (including pension contributions) that reduce an employee’s taxable pay should also be excluded from the calculation. Where employers provide benefits to furloughed employees, these should be continued unless a different arrangement is agreed with the employee.HMRC has confirmed that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements if the relevant employment contract is updated accordingly. The new direction from HRMC states that the employer cannot claim for salary which is conditional on any matter. Therefore, this could exclude salary payments which the parties have agreed are conditional on receipt of a CJRS payment. Further clarification on this point is awaited.
No, employers will receive the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on the 80% pay. The Government will be providing further guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions.
Furlough leave only varies an employee’s right to work and to be paid. Employees will continue to accrue statutory holiday in accordance with the Working Time Regulations. The HMRC guidance states that holiday pay should be paid at the employee’s normal rate of pay. This means that employers will need to top up the 80% furlough payments. The Acas guidance suggests that employers can still request employees on furlough to take holiday as long as they give twice the amount of notice as the amount of required holiday. However, it remains unclear whether taking holiday breaks a period of furlough leave. Employers may be able to vary any additional contractual entitlement to holiday so that this does not accrue, either by means of a contractual right to vary or through agreement.
Up until 1 July the position was that employees must not undertake any work for their employer for furlough to apply. However, the CJRS became more flexible after 1 July. Since then, employers using the scheme have been able to bring furloughed employees back part-time, while still claiming under the scheme for those hours not worked.
It was not initially clear whether employers could move employees on long term sick leave onto furlough. However, the Government guidance later confirmed that employers could choose to furlough these employees for business reasons along with other employees. These employees would then be classified as furloughed employees and should no longer receive sick pay. An employee furloughed in these circumstances can continue to be furloughed from 1 July if the employer has previously submitted a claim for them in relation to a furlough period of at least 3 consecutive weeks between 1 March 2020 and 30 June.
Employees placed on furlough will still retain their right, if eligible, to Statutory Sick Pay (SSP). This means that sick employees must be paid at least SSP although employers can choose whether to move these employees onto SSP or to keep them on furlough, at their furloughed rate. When deciding which course of action to take, employers should be alert to the possibility of discrimination.If employers move employees from furlough leave to SSP, employers cannot claim for furloughed salary whilst the employee is receiving SSP. Employees must pay SSP themselves as usual. Moving a furloughed employee onto SSP if they become sick appears to be of little advantage to employers.If an employee is already on SSP, the new Treasury direction allows for employers and employees to agree when that period of incapacity is ended, and the furlough leave can begin.If an employee is on a prolonged period of unpaid sick leave, the new direction states that the employee and employer can agree to end the period early but only if this variation was agreed by 20 March 2020.
The Government has confirmed that it permits employees placed on furlough leave by one employer to continue to work for another employer. This is subject to the contract of employment between the employee and the primary employer permitting working elsewhere.
Once again, the question here is whether the furloughed employee who is participating in a disciplinary, grievance or performance improvement process (PIP) will be ‘working’. The answer is likely to be ‘no’ in relation to the employee concerned – (except in relation to PIPs as these clearly cannot be dealt with while the employee is on furlough) and these processes could therefore in theory continue during furlough.
The Job Retention Scheme 70% contribution is a grant paid to the employer. As a result, it is the employer’s responsibility to:
The Job Retention Bonus is a one-off payment to employers of £1,000 for every employee who they previously claimed for under the CJR scheme, and who remains continuously employed through to 31 January 2021. Employers will be able to claim the Job Retention Bonus after they have filed PAYE for January and payments will be made to employers from February 2021. All employers are eligible for the scheme including recruitment agencies and umbrella companies. Employers will be able to claim for employees who:
New employers may be eligible to claim the Job Retention Bonus for employees of a previous business which were transferred to them if either TUPE applies, or the PAYE business succession rules apply to the change in ownership. New employers may also be eligible to claim the Job Retention Bonus in respect of the employees associated with a transfer of business from the liquidator of a company in compulsory liquidation, where TUPE would have applied were it not for the company being in compulsory liquidation.The transferred employees must have been furloughed and successfully claimed for under the scheme by their new employer. An employer will not be eligible for the Job Retention Bonus in respect of any employee transferred under TUPE or under the business succession rules after 31 October 2020. Claims will only be accepted for employees who were eligible for the scheme. Where a claim for an employee was incorrectly made, a Job Retention Bonus will not be payable.
Only earnings recorded through HMRC Real Time Information (RTI) records can count towards the £520 a month average minimum earnings threshold. The Government will publish detailed guidance on this in September 2020.
The Government will cease CJRS contributions after 31st October 2020. After that, employers face three principle choices. The first is bringing all workers back into the workplace (either at home or in the office) to commence work again at their normal contracted hours.
The second is that employers and employees agree a reduction in hours (and likely pay) if the business is still being affected by the economic and industrial complications COVID-19 has caused and the work stream that the employer now has cannot sustain the employee(s) at the same level as it did at the start of the year.
Thirdly, if contractual amendments and reduction of hours/days are not appropriate, and an employer still cannot justify the full time wages of all of its furloughed (and non-furloughed) staff, then that employer may wish to then consider a redundancy exercise.