Over the past few days the government has updated its guidance on the Coronavirus Job Retention Scheme (CJRS). In particular, on 15 April 2020 the government announced that the qualification date, upon which the employee has to have been on the employer's payroll, has changed from 28 February 2020 to 19 March 2020. Additionally, the Treasury issued a Direction to HMRC (the Direction) on 15 April 2020 giving further instructions for making payments under the CJRS. Here are some FAQs which reflect the discussions we have been having with each other, and the queries we have been receiving from our clients. Please refer to our Trowers Tuesdays for more information regarding the Direction.
Can you prevent someone working elsewhere during furlough if you're topping up their salary to 100%?
The CJRS guidance makes it clear that an employee can be furloughed by one employer but continue to work for another, if their contract of employment allows it. So an employer will need to check what is in the contract; such a clause can, of course, be varied if an employer wishes to allow a furloughed employee to work elsewhere.
Can someone who is off on furlough leave take holiday?
The recently updated Acas guidance on holidays, which has no statutory force, states that those who are furloughed can still request and take their holiday in the usual way, including bank holidays. The Acas guidance makes it clear that employees and workers must get their usual pay in full for any holidays they take.
Unfortunately the CJRS guidance is silent on holidays, be that whether they can be taken or reimbursed through the scheme. Given HMRC has been referring people raising holiday pay queries to the Acas guidance it seems likely that this is the intention.
Hopefully the position on holidays will be clarified as a matter of urgency and as soon as it is we will update you.
Should you be reinstating people who were made redundant on or after 19 March?
The CJRS guidance states that "if you made employees redundant, or they stopped working for you on or after 28 February 2020, you can re-employ them, put them on furlough and claim for their wages through the scheme." .
This applies to employees that were made redundant or stopped working for you after 28 February, even if you do not re-employ them until after 19 March. This applies as long as the employee was on your payroll as at 28 February and had 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.
There is no obligation to do this. The potential risk in not considering this is that people may challenge the redundancy decision on the basis that furloughing has offered the employer another option (albeit a temporary one). However, the reason for the redundancy may not be related to the coronavirus pandemic (for example it could be due to a re-organisation), or the employee may have been disciplined and dismissed, or dismissed for capability reasons. In all of these instances it is likely to be counterproductive to re-employ them and provided the proper processes were followed, there will be a concrete reason behind their dismissal which should defeat any suggestion of unfairness.
Can you furlough staff if you're in receipt of public funding?
The CJRS guidance makes it clear that the government expects that the scheme will not be used by many public sector organisations "as most public sector employees are continuing to provide essential public services or contribute to the response to the coronavirus outbreak". It goes onto state that where employers receive public funding for staff costs, and that funding is continuing, the government expects employers to use that money to continue to pay staff in the usual fashion and not to furlough them. This also applies to non-public sector employers who receive public funding for staff costs. Organisations who are receiving public funding specifically to provide services necessary to respond to COVID-19 are not expected to furlough staff.
If you are receiving funding from a public body for a contract and all, or the majority, of that money is for the provision of that service (in other words staff costs) then, provided that the level of funding remains the same and no additional staff costs are incurred, you won't be able to furlough staff.
There may be circumstances though where furloughing is an option. An example of this could be where an employee needs to shield and cannot work from home, or where someone falls within the "vulnerable" category and cannot work from home. In these instances you would have to incur additional costs to cover their role and if you do, we believe that you could furlough the employee who needs to shield.
What should be included in a furlough claim?
An employer can claim for 80% of the employee’s salary, as in their last pay period prior to 19 March 2020, up to a maximum of £2,500 but must disregard anything which is not regular salary or wages. In addition an employer can claim National Insurance Contributions and minimum automatic enrolment employer contributions on the subsidised wage. You cannot claim for any additional NICs or pension contributions on any top up payments made.
If, based on previous guidance, you have calculated the claim based on the employee’s salary as at 28 February 2020 (and this differs from their salary in their last pay period prior to 19 March 2020) the employer can choose to still use this calculation for the first claim.
You will also be able to claim for any regular payments you are obliged to pay your employees, including past overtime, fees, compulsory commission payments and deferred earnings. Discretionary bonus and commission payments, any conditional payments (e.g. where a threshold must be met), and non-cash payments (for instance free travel) are excluded.
The cost of non-monetary benefits provided to employees, including taxable Benefits in Kind and benefits provided through salary sacrifice schemes that reduce an employee's taxable pay will not be included in the reference salary. The CJRS guidance notes that normally an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. However, it states that HMRC agrees that COVID-19 counts as a life event that could warrant changes to salary sacrifice arrangements if the relevant employment contract is updated accordingly. We anticipate that for someone opting out of their salary sacrifice arrangements this would increase their reference salary for the purposes of the amount claimed under the CJRS, but it is not entirely clear from the guidance.
Both the Apprenticeship Levy and Student loans should continue to be paid as usual and will not be covered by the CJRS.
HMRC has announced that the CJRS should be open from 20 April for claims, with payouts planned for 30 April.
Can you make an employee redundant rather than placing them on furlough leave?
Yes this is still possible but you will need to consider furlough leave as an alternative to redundancy as part of a fair process.
Can employees who are shielding or off on long-term sick leave be furloughed?
Yes, the guidance makes it clear that employees who are unable to work because they are shielding in line with public health guidance (or need to stay home with someone who is shielding) can be furloughed.
The guidance also says that employers are entitled to furlough employees who are on long-term sick leave, but the Direction states that where SSP is payable or liable to be payable (whether or not such a claim for SSP has been made) at the time an employee is furloughed then their period of furlough leave cannot begin until the original SSP has ended.
What happens in relation to employees who want to shield and have underlying health conditions, but have not been told to shield by the NHS/ their GP?
If an employee believes they should have been told to shield then they should contact their GP.
If they are self-isolating in accordance with Public Health England's guidance or are otherwise too sick to work then then they should be paid statutory or company sick pay. If a fit note suggests that their working arrangements should be reviewed rather than saying that they are not fit to work, then you should consider if any adjustments can be made to their role, or potentially consider redeploying them, if possible, on a temporary basis.
If an employee is fit then you should consider whether they can work from home or if they can be allocated other work to enable them to work from home. If not then you can consider furloughing.
Can you furlough staff who need to look after children following school and nursery closures?
Yes, you can. The CJRS guidance makes it clear that employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed, and gives as a specific example employees that need to look after children.
If you have taken on staff by virtue of TUPE on or after 19 March, can you furlough them?
The CJRS guidance states that a new employer is eligible to claim under the scheme in respect of the employees of a previous business transferred after 19 March provided that TUPE, or the PAYE business succession rules, apply to the change in ownership. This provides welcome clarification as the previous version of the guidance made it clear that furloughing was only an option for staff on the payroll on, or before, 28 February, and was silent on what happened to staff who transferred to a new employer after that date.
Do pension contributions continue for staff on furlough?
Yes, the Pensions Regulator has made it clear that both employer and employee pension contributions should continue whether staff are on furlough or not, although it has acknowledged that it will take a "proportionate and risk based approach" towards enforcement decisions.
Under the CJRS, as well as 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, employers can also claim the associated employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. The amount received by staff will be subject to deductions for their pension contribution, employee NICs and tax.
If the employer was paying more than the auto-enrolment minimum and decides not to top up the pension contribution there is a potential breach of contract risk and technically there is a requirement to consult for 60 days. However, our view is the risk is low provided employers have explained the position clearly to staff and given them the opportunity to raise questions or concerns.
Employers should also make sure the pension scheme trustee or provider is aware of and can implement any changes to pension contributions and that the proposed change does not conflict with the scheme rules. The Regulator is clear that where there is a conflict, the rules should be amended as necessary.