The Coronavirus Job Retention Scheme (CJRS) was announced on 20 March 2020. The government updated their employer guidance 4 May 2020 making this their ninth iteration. The Treasury also published a Direction to HMRC on 15 April 2020 in exercise of powers granted by the Coronavirus Act.
The government have also now created a dedicated website (www.businesssupport.gov.uk) and employers can subscribe to receive notifications of updates by email.
What is Furlough?
Furlough is a leave of absence for employees from work during which period employers may apply for a grant from HMRC.
Employers can claim grants through the scheme to cover up to 80% of any furloughed employees usual monthly wage costs up to a maximum of £2,500 per month. In addition to this employers can claim corresponding National Insurance contributions and minimum (3%) automatic enrolment pension contributions excluding any top up amount.
Employers can choose whether or not to offer a top up of the employee's salary above that amount covered by the scheme (subject to obtaining employee consent for any pay decrease, see below). If they do so, employers will also be liable for National Insurance contributions and pension contributions on any additional amount.
Past overtime, fees and compulsory commission payments can be included in the claim although no guidance is provided as to what 'fees' will include. Discretionary commission, bonuses (including tops) and non-cash payments are not included neither are benefits in kind such as health insurance or the cost of company cars.
The method for calculating an employee's entitlement will differ depending on their employment. Employers should refer to the guidance and paragraph 7 of the Direction for a detailed explanation.
Who is eligible?
Although the initial guidance referred to avoiding redundancies, the updated guidance makes no reference to redundancies and employers do not have to be close to making redundancies in order to access the scheme. It is available to employers 'unable to maintain their workforce' due to COVID-19. It is clear from the Direction to HMRC that the scheme is not limited and is available to any employee by reason of circumstances arising as a result of coronavirus or coronavirus disease.
Any employer with a PAYE online payroll scheme in place on or before 19 March 2020 and a UK bank account may apply.
Any employee who was on a PAYE payroll on or before 19 March 2020 may be eligible to be furloughed. This date has been extended from 28 February 2020 and an employee will be eligible provided an RTI submission notifying payment was made on or before the 19 March 2020.
Employees dismissed on or after 28 February 2020 may (at the employer's discretion) be re-hired and will then be eligible. This applies even if they are re-employed after the new qualifying date of 19 March 2020.
Employees who transferred under TUPE after 19 March 2020 are eligible for furlough provided they were on a PAYE payroll with the previous employer prior to 19 March 2020.
Directors may be furloughed provided the decision to furlough is formally adopted as a decision of the company and noted in company records and in writing to the director.
How to choose which employees to furlough?
Ideally, employers will carry out some form of selection criteria to avoid potential for claims that non-furloughed employees were unfairly left out. Given the circumstances, the selection criteria need not be in-depth.
If the alternative to furlough may be redundancies then depending on the number of employees and the time period collective consultation obligations may be triggered and employers may have to comply with prescribed duties.
It may be a reasonable adjustment to prioritise disabled employees. Employers should continue to be mindful of their obligations under the Equality Act 2010 when selecting employees for furlough leave and we are on hand to assist with any queries in this respect.
How to furlough employees
Normal employment law continues to apply and any change in contract will have to be agreed with the employee. Employers must confirm the employee's furloughed status in writing and keep this record for a period of five years. The HMRC Direction makes clear that this must be agreed in writing but can be by way of email or other electronic form.
Whilst on furlough leave employees can not undertake any work for, or on behalf, of the employer including providing services or generating revenue. However, subject to not providing services or generating revenue for the employer, employees are able to undertake training and do volunteer work. Training relevant to the employee's employment agreed between the employer and employee before being undertaken is permitted.
Provided it is permitted in their contract, employees are entitled to work for another employer whilst on furlough. Employees with multiple employers in jobs which qualify can be furloughed from each role, likewise they could be furloughed by one employer but remain working for the other.
Furloughed directors may undertake work to fulfil a duty or other obligation arising by or under an Act of Parliament relating to the filing of company accounts or provision of other information relating to the administration of the director's company. This is a very narrow exception.
Holiday will continue to accrue whilst on furlough leave. Any holiday taken during a period of furlough (including bank holidays) must be paid at an employee's usual full pay and employers must make up any difference between the furlough pay and their normal salary.
Rotating furloughed employees
A period of furlough must last for a minimum period of 3 consecutive weeks (21 calendar days) to be eligible for the grant. After this initial 3 week period, there are no further limitations so a period of furlough may be 3 weeks and 1 day for example. We now know from the updated guidance that employees may be placed on and off furlough multiple times provided each period of furlough is for a minimum of 3 weeks, allowing employers to rate employees to meet the needs of the business.
How the scheme works
HMRC anticipate the claim portal will go live on 20 April 2020. Employers will require the following information to make a claim:
- Employer PAYE reference number;
- The number of employees being furloughed;
- National Insurance Numbers for the furloughed employees;
- Names of the furloughed employees;
- Payroll/employee number for the furloughed employees (optional);
- Your Self Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number;
- The claim period (start and end date);
- Amount claimed (per the minimum length of furloughing of 3 consecutive weeks);
- Bank account number and sort code;
- Contact name; and
- Phone number.
Employers furloughing less than 100 employees will need to enter the above information manually for each staff member. For 100 or more staff employers will need to upload a file with the collated information in an acceptable format.
The onus is on employers to:
- Calculate the claim amount;
- Keep employees informed of the claims made on their behalf; and
- Adjust their payroll before pay dates.
HMRC reserve the right to audit all claims and given that the written notification must be kept for 5 years it seems they anticipate a prolonged period of audit.
After the scheme ends
The scheme was initially in place from 1 March 2020 to 30 June 2020. However, this was extended on 12 May 2020 to the end of October 2020. Employers should use this time to look ahead at what action might still be required after the furlough scheme ends.
The guidance does not prohibit employers from commencing redundancy processes during a period of furlough and employers who may trigger the need to comply with collective consultation periods with statutory period of consultation may consider this appropriate.
Our specialist employment law team provide expert advice to both employers and employees on a full range of employment matters. For more information contact us on 01603 693500 or email us using the 'Make an enquiry' form on our website.
*This article is accurate at the time of writing, 15 May 2020. This article is provided for general information purposes only and does not constitute legal advice or other professional advice.