My business has closed following the Prime Minister’s statement. All staff have been sent home and informed that they will be updated in three weeks. What should I pay my employees?
Well, this depends.
If there is a layoff clause in an employee’s contract and this clause is exercised, there is no entitlement to salary.
If an employee agrees to being placed on Furlough leave then they will be entitled to 80% of their usual salary (subject to the £2,500 cap).
If neither of the above apply (i.e. there is no lay off clause and they have not agreed to be placed on Furlough Leave) then the employee is entitled to their full salary.
Am I eligible to claim under the Coronavirus Job Retention Scheme (CJRS)?
Any UK organisations with employees who has created and started a PAYE payroll scheme on or before 28 February 2020 can apply. This includes:
- businesses
- charities
- recruitment agencies (agency workers paid through PAYE)
- 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.
How much can I reclaim under the CJRS?
The portal to facilitate the reimbursement has not yet been created. As you can imagine, this is no easy task and HMRC are working as quickly as possible to put this in place.
Once it is up and running, you can reclaim a grant from HMRC to cover the lower of 80% of an employee’s regular wage or £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that subsidised wage. Fees, commission and bonuses should not be included.
Which Employees can I claim for?
Those Employees who were on your PAYE scheme on or before 28 February 2020, and on a contract of employment, including:
- full-time employees
- part-time employees
- employees on agency contracts
- employees on flexible or zero-hour contracts
How long can an employee be on Furlough Leave?
Furlough leave must be taken in minimum blocks of three weeks to be eligible for funding.
Furlough Leave is initially proposed for up to 3 months (and may be backdated to 1 March 2020) which could be extended should the government decide.
Can you take employees on and off Furlough Leave multiple times?
There is nothing in the guidance which prohibits rotating furlough leave amongst employees, provided each employee is off for a period of at least three weeks.
Can we ask employees to take annual leave whilst on furlough leave?
Yes – proving adequate notice has been given. Generally speaking an employer has to provide two days’ notice for every day they want an employee to take.
I have a new employee scheduled to start on 6th April 2020 – can they be furloughed?
You will only be able to reclaim in respect to those employees on your PAYE scheme on or before 28 February 2020. If their start date is later than this, they will not be eligible.
If an employee becomes sick whilst on furlough leave what do I have to pay them?
The key aspect is to determine what the effective cause of an employee’s absence is. In this situation – if they are genuinely sick and meet the criteria under Statutory Sick Pay (“SSP”) provisions, it is likely that they will have to switch to SSP.
If an employee decides to self-isolate at home because they are worried about being in a ‘vulnerable group’, are they entitled to SSP?
No. An employee is only entitled to SSP if they are self-isolating in line with the regulations laid down by Public Health England (“PHE”), based on advice from NHS-111 and if they are presenting symptoms (or if they live with someone who is). PHE encourages ‘Vulnerable groups’ to practice social-distancing as opposed to self-isolation.
How will furlough work for Directors?
It is important to distinguish between non-executive directors and executive directors. Non-executive directors are not employees and as such will not be entitled to the benefits under the Furlough Scheme. In contrast, executive directors are internal employees of a business and the usual cap will apply. If a director is also a shareholder, they are likely to be on a low salary / high dividend remuneration package. They should consider that the furlough reimbursement is likely to only apply to 80% of salary and not to any dividend payments.
How will furlough leave apply to agency staff and fixed term employees?
Agency firms will be able to put their employees on furlough leave – providing existing employment legislation is adhered to.
Fixed term employees can be placed on furlough leave as with any other permanent employee.
How will furlough leave apply to those on variable working hours?
An employer can claim for the higher of:
- the same month’s earning from the previous year; or
- the average monthly earnings in the 2019-20 tax year
I want to Furlough some staff but not all – how and who do I choose?
The selection criteria could be based on factors such as length of service, assessment on last year’s appraisal, etc.
Alternatively, an employer could also seek volunteers for the scheme.
In light of recent events, it is likely that a Tribunal would not be overly critical of an Employer in deciding who to place on Furlough Leave.
Can I prioritise elderly and vulnerable staff when deciding who gets Furloughed?
Whilst at first glance, this may raise issues with discrimination (potentially age and disability related), an Employer may be able to show that this selection is fair if it can be based on a legitimate aim and may be justified.
To what extent should my employees be working whilst on Furlough Leave?
Not at all. If they are working, however infrequent, then they will not be eligible under the scheme. Even checking emails, taking business calls could be construed as working and as such an employer would not be able to reclaim 80% of an employee’s wages.
However, an employee is able to undertake training and do volunteer work, provided they do not provide services to or make any money for their employer.
Can I claim a further reimbursement of SSP for an employee who is advised to self-isolate for a second time?
It is unlikely that the government will allow an employer to reclaim a further 14 days SSP.
How much consultation is required for Furlough Leave to be implemented? Could collective consultation be triggered?
Fewer than 20 employees there is no need for collective consultation process.
An employer cannot impose an 80% reduction in wages unless the contract of employment provides for this. An employee can agree and this process takes as long as is necessary for an agreement to be reached.
For over 20 employees, this is not likely to be the case unless an employer is proposing to make dismissals. If the process leads to a redundancy process (or a dismissal and rehire arrangement) then the collective consolation process would be triggered and the relevant process should be followed.
What if the 80% takes my employee below the National Living Wage/ National Minimum Wage?
Individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working. As a furloughed employee will not be working this will be permitted.
Do I have to pay 80% of my employee’s salary before the government scheme takes effect?
Wages are protected and an employer may be subject to an unlawful deduction of wages claim if this is not paid.
Will an employee’s contractual benefits continue during Furlough Leave?
These should continue as normal subject to agreement – an employer may reclaim 80% of an employee’s salary (subject to a cap of £2500).
Can employees currently on maternity, paternity, shared parental leave etc. cut their absence short in order to be automatically be furloughed in order to increase their payments, funded by the Government?
This not quite clear under the guidance.
Providing the minimum periods have been adhered to (2 weeks off work – or 4 weeks if they work in a factory or workshop – immediately following the birth of their baby), it may be possible (by an employee giving the required notice or by agreement) that an employee could cut short their maternity leave and be placed on furlough leave. However, once furlough leave expires an employee will not be permitted to return to maternity leave when the furlough leave expires.
Does the CJRS override an employee’s contract of employment?
No – the employer/employee relationship will continue to be governed by the contract of employment.
If an employer is looking to place an employee on furlough leave, there should either be a contractual provision for lay off or an agreement with the employee for them to be placed on furlough leave.
Does holiday continue to accrue during furlough and at what rate?
Yes – the rate will be governed by the contract of employment.
It is unclear whether HMRC intends to rely on the guidance only, or whether there will be actual legislation. Please contact a member of the Employment team if you have any questions.
Please contact a member of the Employment team if you have any questions. You can call us now or contact us using our online form and we will help you through this difficult time.
