The UK Government has provided further details of the Coronavirus Job Retention Scheme to help employers avoid redundancies during the Co-Vid pandemic. We have summarised the key features below.
Scope of the Scheme
The Scheme is open to all UK employers, who operated a PAYE payroll scheme on 28 February 2020. It will also apply to companies in administration.
Employers can claim for any employee they place on furlough provided that employee was on the PAYE payroll on 28 February 2020. The scheme will cover:
- Full time employees
- Part time employees
- Employees on agency contracts
- Employees on flexible or zero hours contracts
Employees made redundant since 28 February 2020 can be rehired and furloughed.
Furlough – what it means
An employee must be furloughed for a minimum of three weeks and during the furlough cannot work for the employer at all. Employees working on reduced pay or hours will not be eligible for the grant and the employer will have to pay them as usual. Furloughed staff can carry out volunteer work or training providing it does not provide services to or generate revenue for their employer.
Payments under the scheme
The government will provide a grant to the employer of 80% of a furloughed employee’s actual salary before tax up to a maximum of £2,500 per month. This must be paid to the employee. The payment will also cover the Employer National Insurance contributions and minimum employer pension contributions under automatic enrolment. Fees, bonuses and commissions are not covered by this payment.
Employees earning more than the Scheme maximum can be furloughed and the Government will provide the subsidy up to the Scheme’s cap. Employers can top up an employee’s pay if they wish but are not obliged to do so. Any additional Employer NIC and pension payments from a top up will not be covered by the scheme.
Claims under the Scheme can be backdated to 1 March 2020.
Enhanced maternity or paternity pay are also covered by this scheme.
National Living Wage/ Minimum Wage
The NLW/NMW limits do not apply to furloughed employees as they are only entitled to this Wage level for hours they are working. As this is a subsidy for employees who cannot work, they are only entitled to 80% of their earnings even if this is below the NLW/NMW level. If they are required to carry out any training while they are furloughed then time spent on this should be paid at the NLW/NMW level.
Income Tax and Employee NIC
Payments to employees under this Scheme will still be subject to Income Tax and National Insurance Contributions as usual. They will also have to pay auto- enrolment pension contributions.
Preparing to furlough staff
In deciding who to place on furlough employers will need to consider which members of staff they are likely to need to retain in order to keep their business running during this emergency.
They do not need to place all of their employees on furlough at the same time or at all. It is possible to place some staff on furlough and to have a roster with staff swapping between work and periods of furlough (which must be at least three weeks). Employers will need to consider carefully who to place on furlough as discrimination law will still apply to this decision.
Any furloughed staff will need to agree to the change in their employment. The employer should write to each individual to confirm their agreement and the arrangements for the furlough period.
It would be prudent to agree a variation to contracts now so that furlough arrangements can be put in place quickly if they are needed in the future.
Where this change affects 20 or more employees the statutory consultation rules are likely to apply. This could hold up any decision for up to 30 days while consultation requirements are complied with. However, in this current emergency it is likely employers could rely on the “special circumstances” defence to justify any non- compliance.
The Government plans to have the scheme up and running by the end of April and will provide more details of the scheme over the coming weeks. Further details of the scheme can be found here. https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
Employees still retain their usual employment rights during any period of furlough and this emergency situation.
There are other alternatives to the furlough scheme that employers might want to explore in order to keep staff at work and their business running during this emergency. Carter Bond’s employment team have extensive experience in helping employers introduce changes to their employees.