Until a few weeks ago, nobody had even heard of the word ‘furlough’ – but now, it’s something we’re seeing in the news and all over the internet every single day. The coronavirus pandemic doesn’t look like it’s going to slow down any time soon, so if you’re an employer it’s important to make yourself familiar with what furloughing an employee under the Coronavirus Job Retention Scheme (CJRS) means, and how to implement it in your workplace if required.
The government recently released further guidance regarding what it means for an employer to furlough its staff, and the Chancellor Rishi Sunak released a Treasury Direction on April 15th under the Coronavirus Act 2020 which sets out the legal structure for the scheme.
A reminder of what the Coronavirus Job Retention Scheme is
The government will reimburse 80% of furloughed workers’ normal wages, up to a cap of £2,500 per employee per month, plus the associated Employer National Insurance contributions (NICs) and minimum automatic enrolment employer contributions on that wage.
For example, if your employee normally receives £2,000 a month in wages, the CJRS will pay £1,600 of this. You can then pay the extra £400 to your employee if you can afford to. If your employee normally receives £5,000 a month in wages, the CJRS will only be able to pay the maximum amount of £2,500 (despite 80% of £5,000 being £4,000). If you wish to make up the remaining £2,500 yourself, you can do so at your discretion.
What are the key points from the latest guidance?
Previous legislation had originally stated that the payroll eligibility date for employees to be furloughed was 28th February 2020, but this has since been changed to 19th March 2020. This is a considerably significant amendment to legislation, and will be welcomed by both employers and especially employees who were hired after 28th February 2020 as they will now be eligible to be furloughed. Bear in mind that employees will only be eligible as long as they were on the payroll by 19th March 2020.
The new updates also state that employees who are currently on sick leave and receiving sick pay can move onto furlough – and vice versa. Employers should note that furlough should not be used to make up statutory sick pay (SSP) for short-term absences and they could get into trouble with HMRC if they’re found to be doing this!
Unfortunately, the new guidance does not address the troublesome matter of holidays, although ACAS has verified that employees can be furloughed and on holiday simultaneously. This will come as good news to employers who were concerned that employees would return from furlough leave with lots of annual leave to take, making it even harder for businesses to pick up once the pandemic is over.
The legislation also stipulates how to calculate furlough pay for someone returning from statutory leave, which is helpful. It also confirms that employees on furlough leave are not permitted to work for a linked employer nor an associated one.
The final changes on the latest guidance confirms that employees who transfer to an employer under the Transfer of Undertakings (Protection of Employment) Regulations 2006 act, i.e. TUPE, after 19th March 2020 can indeed be put on furlough leave.
How does an employer know if they’re eligible for the Coronavirus Job Retention Scheme?
All UK employers are eligible to take advantage of the CJRS no matter what size or sector they’re in. This includes small businesses, charities and public authorities. The only eligibility criteria are that the employer must have started a PAYE payroll scheme on or before 19th March 2020, enrolled for PAYE online and have a UK bank account.
The government has recognised that different businesses may be impacted by coronavirus in different ways. Guidance consequently states that the scheme is “designed to help employers whose operations have been severely affected by coronavirus” and that it is for employers who cannot keep on their current workforce because of the effects of the pandemic, whether direct or indirect.
How would an employer select which employees are to be furloughed?
You can put some employees on furlough and keep others on as normal. Government guidance states that if an employee is able to carry out their normal work duties from home, then they should do so and remain on normal pay. If an employee is unable to work from home or they have no work to carry out, then they would be an obvious candidate for furlough leave.
It is important to note that an employee cannot undertake any work for you at all if they’re furloughed. They are, however, able to carry out personal development to help them with their work e.g. take an online course – as long, of course, as the employer is not paying them to do so.
Next steps
Please feel free to contact us for any help with the CJRS. We would be more than happy to help. Alternatively, a new HMRC helpline has been launched to help businesses concerned about paying their taxes due to coronavirus. If you run a business and are concerned about paying your tax due to coronavirus, you can call HMRC’s helpline on 0800 0159 559. There is also a new Business Support Helpline for free advice from the government which is contactable on 0300 456 3565.
This note comprises the view of the author at the time written. This note is not a substitute for legal advice. Information may be incorrect or out of date and may not constitute a definitive or complete statement of the law or the legal market in any area. This note is not intended to constitute advice in any specific situation. You should take legal advice in specific situations. All implied warranties and conditions are excluded, to the maximum extent permitted by law.
