The government has now released much anticipated details about how the Job Retention Scheme will work.
What can employers claim back through the Job Retention Scheme?
The scheme will be open to all UK employers for at least three months, starting form 1 March 2020. Employers will be able to use an online portal to claim for 80% of furloughed employee's usual pre-tax monthly wages, up to a limit of £2,500 a month plus employer's National Insurance contributions and minimum employer pension contributions. The scheme covers basic pay only and will not cover fees, commission or bonuses. The online portal is expected to be available by the end of April.
Employers in all sectors can apply, but the government expects that most public sector employers will not need to furlough employees either because they are working on essential services, or because the employer's public funding covers its staff costs.
Whose wages are covered?
Employers can claim for any employee who was on payroll on 28 February 2020. This will include agency workers, zero-hours workers and other casual staff provided they were on payroll (and paid via PAYE) on that date. It does not cover anyone engaged on or after 1 March 2020 on a new contract.
For employees with variable pay, employers can claim for 80% of either that person's average monthly earnings from the 2019/2020 tax year or the same month's earnings from last year, which ever amount is higher.
Where an employer has made redundancies since 28 February, they have the option to re-hire the employee and put them on furlough. If someone was put on unpaid leave before 28 February 2020, they will not be eligible for the scheme.
What does "furlough" mean?
Employees must be on furlough for a minimum of three weeks, and the employee must do no work for the employer during that time. This leaves open the option for employers to rotate employees through furlough, provided each is on furlough for at least 3 weeks. Employees can still volunteer or undertake training while furloughed, but only if they are not being paid for this and it does not generate revenue for the employer.
If employees are simply put on reduced pay or reduced hours, their wages cannot be claimed back through the scheme. If someone has more than one job, each of their employers can decide to furlough them (or not furlough them) separately and the £2,500 applies to each employer individually. Being furloughed from one job would not prevent someone from carrying on working for their other job, or a new job.
Who and how to furlough
The employee's contract of employment continues to exist during furlough, and employers will need to ensure objective and non-discriminatory selection.
The employer has the option to top up the employee's normal pay to full pay, but does not have to under the scheme. But if the employee is going to receive less than full pay, the employer will need to get the employee's agreement, or be mindful of the effect on the mutual duty of trust and confidence. The rationale and implications of furloughing need to be discussed with the employee, and most are likely to agree, especially if the alternative is redundancy.
What if someone is sick, self-isolating or shielding?
Someone who is off sick, or self-isolating, will be eligible for statutory sick pay and should continue to receive this rather than be furloughed. However, once they are well enough to work or have stopped self-isolating, they can then be furloughed.
Particularly vulnerable employees who are shielding following public health guidance can be placed on furlough.