18 May 2020
Further details on the Government’s Furlough Scheme have been announced
The scheme was originally launched on 20th March and was published on Gov.UK on 26th March, with further updates following on multiple times throughout April and May. The scheme opened for the first entries on 20th April, with payments being made typically within 6 working days (according to HMRC). On 12th May, Chancellor Rishi Sunak announced the scheme will now run until the end of October 2020. Here are some key headlines in respect of the scheme:
- currently employers can reclaim up to 80% of wage costs up to a payment cap of £2,500 per month, plus (not including) the associated employer NICs and minimum auto-enrolment pension contributions (up to the level of the minimum automatic enrolment employer contribution) on the paid wage and you still need to make these contributions on your employee's behalf. HMRC confirmed that employers are able to claim back “any regular payments you are obliged to pay your employees” – this will include compulsory or regular overtime and contractual commission payments but discretionary bonus and commission payments cannot be claimed - the 80% does not include non-monetary benefits (eg the value of health insurance or a car). There is now a whole new page dedicated to payments under the scheme and examples - see this link.
- It's important to note that the reclaim grant for employers (currently 80%) is likely to change with effect from August - we await further details, due by the end of May.
- the reference date for salary to be reclaimed for salaried employees is now the last pay period before 19 March 2020, rather than 28 February. If the 28 February salary was different, the employer can use the 28 Feb figure for its first claim under the scheme. This means that you can now claim for furloughed employees that were on the PAYE payroll on or before 19 March 2020 and which were notified to HMRC on an RTI submission on or before 19 March 2020, i.e. an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020 - again see the link in the last bullet for full details.
- 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
- the re-claimable National Insurance and pension elements are calculated using the furlough salary calculation, not normal salary.
- individuals are only entitled to the minimum wage for the hours they work. So if they are furloughed and do not work, and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working.
- employees on sick pay or self-isolating can be furloughed after the period of sick leave ends or switched onto furlough leave (with agreement) but not both at once.
- employees on maternity (or similar parental) leave can continue to draw SMP (or similar) payments.
- grants will be prorated if your employee is only furloughed for part of a pay period.
- no part of the grant can be siphoned off to fund benefits or deductions made for fees or admin charges.
- Thankfully, an online calculator is along with the online portal and multiple examples are now provided in the guidance documents.
Making a Claim
- the information required to make a claim has been amended and updated - see the link above. Provision of the payroll/employee number for furloughed employees is now optional.
- there is also a new 'step-by-step guide' which has been published (and since updated) to help employers.
- employers with fewer than 100 furloughed employees will need to enter details of each employee directly into the system; those with 100 or more furloughed employees will need to upload a file (.xls, .xlsx, .csv or .ods) with the information.
- you will need a Government Gateway ID and password - if you don't already have one, you can apply online via Gov.uk and search for HMRC services - sign in or register
- agents authorised to act for the employer on PAYE matters can make the claim on their behalf
Eligibility & Restrictions
- to be eligible, the scheme originally stated that the employee must have been on the payroll on 28 February 2020. Originally, if they were hired later, they were not eligible. However, the Government updated the CJRS on 15 April saying that the employer must now have created and started a PAYE payroll scheme on or before 19 March 2020, which includes new starters in this period - however, a RTI (real time information) PAYE submission must have been made to HMRC with new employees included on it on or before this new date. Anybody who was on the payroll on 28 Feb and has since been made redundant can be rehired and put on the scheme.
- furlough leave must be taken in minimum blocks of three weeks to be eligible for funding.
- furlough leave can be rotated amongst employees, and employees can go in and out of furlough leave, provided each employee is off or each period of leave is for a period of at least three weeks.
- the employee must not work at all for the employer paying the furlough. If they work for even an hour (presumably during their entire three week furlough period), they are not eligible. The new guidance also includes that employees cannot work for organisations that are linked to the employer when on furlough.
- HOWEVER, whilst the Scheme specifically prohibits furloughed employees from undertaking any work which makes money or provides services for their current employer, HMRC’s guidance has confirmed that such employees are permitted to work for another employer whilst on furlough. This will be subject to the restrictions of their employment contract and subject to being recalled from furlough.
- Employees can also take part in training for their employer whilst furlough - subject to certain conditions - see this link.
- employees of a previous business TUPE transferred after 19 March (as updated on 15.04.2020) can be placed on furlough by the new employer.
- claims can be backdated to 1 March 2020.
- employers cannot make more than one claim during a claim period - employers should make their claim shortly before or during running payroll.
- employers must claim for all employees in each period at one time – you cannot make changes to your claim, although HMRC are currently working on the ability to correct errors.
- any organisation with employees can apply, including charities, recruitment agencies and public authorities; however, the government does not expect public sector employers to use it as long as central government continues funding wage costs in the normal way. With agency employees, the scheme is only available for agency employees who are not working. See the CJRS scheme for full details of 'other' employees (including agency workers, LLPs, Limb (b), contingent workers and contractors under IR35).
Employment Law Conditions
- when agreeing changes in hours (and acceptance of 80% pay), normal employment law applies - make sure you put the proposal in writing and get agreement from your employee(s) - this has been confirmed by the HMRC as a requirement.
- The employer must be careful not to discriminate in deciding who to offer furlough - normal employment law still applies. However, prioritising vulnerable workers is not considered to be discrimination, as prioritising the over 70s or key health conditions is almost certainly justifiable - employers can furlough "shielding" workers (and those who need to stay at home with someone who is shielding) - my advice is to ask for a copy of the shielding letter they will have received from the NHS.
- an employer can choose to top up to 100%, but does not have to (subject to employment law and renegotiating any contractual entitlements).
Other Key Info
- on 17th April the Government extended the furlough scheme - originally running until 31st May 2020, the scheme was extended until the end of June 2020. On 12th May, it was further extended until the end of October 2020, with changes to how the scheme works expected from August.
- there is now guidance available re holiday pay whilst on furlough - please see my other update item relating to this for more information.
- Apprentices can be furloughed in the same way as other employees. Furthermore, apprentices can continue to train whilst furloughed, subject to the requirement to ensure that they are paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (as appropriate) for the time spent training. This means employers would have to top up to NMW levels whilst on furlough.
- The Apprenticeship Levy and Student Loans should continue to be paid as usual.
- HMRC has confirmed that employees who cannot work because they have caring responsibilities resulting from COVID-19 can be furloughed. However, this DOES NOT mean that you HAVE to furlough them so I would recommend proceeding with caution in this regard as ACAS’s guidance is still that these employees would be entitled to dependant leave only if there isn't actually a need to furlough someone.
- Company directors can be furloughed. They can still perform their statutory duties, but NOT other work for the company - see my information for Directors on what is allowable.
- HMRC has stated that the written record of the employee’s agreement to be furloughed should be kept for 5 years (presumably in case of audit) - we are still waiting for confirmation on what might be auditable but it could include social media records - please note that the HMRC have stated that fraudulent furlough claims could result in criminal proceedings. On 14th May, HMRC advised that records must be kept for 6 years following the end of the scheme. It would be advisable to make sure GDPR declarations are in place around retaining information.
EMPLOYERS SHOULD ENSURE THEY ARE KEEPING RECORDS OF WHO HAS BEEN FURLOUGHED & HOW MUCH THEY ARE CLAIMING
& REMEMBER THAT FURLOUGH IS SUBJECT TO A MINIMUM PERIOD OF 3 WEEKS.
Full details of the scheme can be found here: Claiming for wage costs through furlough scheme and on how to make a claim here: Working out your 80% wage claim. A 'step-by-step guide' has also now been published.
Please get in touch with me if you have any further queries or would like to talk about the best way to furlough an employee.
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