COVID-19 Job Retention Scheme

Stop Press: The online portal for claims did indeed go live this morning and may be accessed here. Early indications are that there have been some minor issues with accessibility but received wisdom is they may have been deliberate as HMRC tries to control the volume of applications at any one time. It may to wait to wait until later in the day to submit a claim.

Since first posting about this on 27 March, there have been so many changes and updates one could be forgiven for thinking the Government was making it up as it went along … But even if that were true one might be inclined to forgive in the circumstances.

From a practical perspective though, there is an obvious risk of confusion so, with the claim portal due to open today, let us recap and/or clarify where we are now.

First and foremost, the key point remains that the Government will reimburse more or less immediately 80% of the salaries (up to a maximum of £2,500pcm) of any PAYE staff who are asked not to work. That means those earning up to £37,500 a year will receive a full 80%.

Secondly, it remains the case that nothing in the Scheme alters the underlying employment law. Asking any member of staff to go on ‘furlough’ (as the Government is suggesting we call it) represents a variation of the employee’s contract. As such it requires consent and insisting could be taken by the employee as a dismissal.

It is fair to say that may be unlikely in the current climate especially as the alternative to furlough may well be redundancy. All the same, it will be good practice to consult about furlough arrangements with staff especially where there is still some work to be done and so you have keep some people working (possibly under considerable stress) while others have a paid ‘holiday’.

There is no easy answer there but it will be important not to discriminate and as far as possible secure consent. It will be a tough test of an employer’s diplomacy skills.

Leaving aside consultation, there are several common questions which have been raised.

Who does it apply to?

It only applies to employees who were on PAYE and had been notified to HMRC via an RTI submission on or before 19 March  2020. This is a change meaning some more employees may now be eligible but, as most employers only report to HMRC at month end, perhaps not that many.

It does not cover workers or other contractors who are paid on invoices nor anyone added to the payroll after 19 March. It also only applies to employees who are on furlough for a minimum of 3 weeks.

Are there any formalities?

The guidance makes it clear you must confirm in writing to the employee that they have been ‘furloughed’. After some confusion arising from previous wording, the most recent guidance clarifies that it is not necessary for the employee to have consented in writing (but see below about the employment contract).

When does it operate?

The start date is 1 March and it will now apply for minimum of 4 months i.e. until the end of June (another recent change). It will be reviewed and may be extended further if needs be.

When will we be refunded?

The guidance indicates that the online portal for claims will be available from today, 20 April. Cynics won’t be holding their breath and even if launched, will it cope with the pent up demand? We can but wait and see.

Guidance has been issued setting out the information which will be required as well as how to work out the claims. Note that claims may only be made every 3 weeks at most.

Do I have to pay the missing 20%?

The indications from Government are that while you may pay the missing 20% it is not obligatory, at least under the terms of the scheme.

So, you don’t need to pay it in order to claim the 80% but there is no suggestion of any legislation to override existing employment law.

Therefore, unless there is an agreement with the employee, I consider that the failure to pay the 20% will be a breach of contract. An employee could claim constructive dismissal or, more likely, bring a claim for the 20%. It is therefore vital to obtain and record consent.

Does the grant cover ENIC?

Yes. The refund will include any Employer’s National Insurance and the minimum automatic enrolment pension contributions on the 80% of salary (but not any higher payments an employer may have to make).

How do I work out the 80%?

In the case of variable earnings, the base figure will be the higher of the earnings in the same period last year or the average pay over the last 12 months.

There is detailed guidance now available (see below for links).

What about National Minimum Wage?

The NMW is only payable for those who are working. Therefore, it is not unlawful for payments to be lower than the NMW while on furlough.

Can staff go on part-time furlough?

No. The employee can do no work at all for you. Staff may do training or volunteering provided it earns nothing for the employer. While training, employers will have to ensure the staff are paid NMW.

Employees MAY work for another employer provided this is not forbidden by their contract (and even if it did a change could be agreed of course). This appears likely to have been permitted in order that furloughed staff might take up temporary work with the NHS, supermarkets or other critical areas.

Can I rotate staff on furlough?

Rotating furloughed staff would be an excellent way of sharing the load and changes to the guidance now make it clear staff may be furloughed more than once.

This indicates rotation is fine but it does not alter the fact staff must be furloughed for periods of at least 3 weeks.

What about staff who are on sick leave?

Sickness (or isolation) is not a good reason to put anyone on furlough and staff cannot be paid both SSP and be furloughed at the same time.

If they are currently off sick then the guidance suggests it is acceptable to end the sick leave and furlough them instead though there is a discrepancy here. The Treasury Direction (which gives legal effect to the Scheme) says any existing period of entitlement to SSP must end before a furlough can begin. This suggests the employee will need to be fit for work again before they can be furloughed even though the guidance does not suggest that.

Similarly, if someone becomes ill while on furlough, you may either keep them on furlough or put them on sick leave.

Does holiday continue to accrue?

Yes. The contract of employment remains in place so all rights, including holiday will continue to accrue as normal.

Can I force an employee to take holiday during their furlough?

In principle, yes, subject to complying with the statutory notice requirements. These generally require an employer to give notice of double the mandated holiday. So, if wanting a member of staff to take 2 weeks’ holiday, 4 weeks’ notice would be required.

The employee is entitled to full pay while on holiday and it is not 100% clear whether the furlough grant can still be claimed. This is not addressed by the employer guidance but the employee guidance notes that they will be entitled to be paid in full and that the employer ‘will be obliged to pay the additional amounts over the grant’. This certainly suggests that the grant can still be claimed.

However, the same guidance goes on to warn that ‘During this unprecedented time, [the Government is] keeping the policy on holiday pay during furlough under review’.

It may therefore be very unwise to impose holiday on staff in the expectation of recouping the 80%; the rules may yet change again.

Can I make staff redundant during or after furlough?

Yes. Subject to complying with the consultation requirements, if the circumstances of the business mean redundancies are necessary you can take that action whenever you wish.

What about staff I’ve already made redundant?

The employer guidance confirms that the scheme applies to those made redundant after 28 February who are subsequently reinstated.

However there is another inconsistently here. In the employer guidance, under the heading ‘Employees you can claim for’ it limits entitlement to those dismissed between 28 February and 19 March; therefore an employee dismissed after 19 March would not be eligible to be furloughed even if reinstated.

On the other hand, in the same document, under the heading ‘If you made employees redundant or they stopped working for you after 28 February 2020’ there is no reference to the cut off date of 19 March.

In the employee guidance, the reference to 19 March as a cut off date is repeated so, on balance, I consider the intention is that, as a refinement to the scheme, the cut off date is now intended to apply but part of the guidance was not updated to reflect the change clearly.

What about new employees?

As noted above, the scheme only covers staff who were employed, on the PAYE payroll and notified to HMRC as at 19 March 2020. Staff taken on after that date are not covered by the scheme.

What about a TUPE transfer?

A new employer is entitled to claim for employers joining under TUPE even if this is after 19 March 2020 provided the TUPE or PAYE business succession rules apply.

It is inevitable that a scheme introduced urgently was unable to consider every possible permutation in advance which is why the guidance has had to change and become more complex as time has passed.

HMRC have made it clear they will be carrying out retrospective checks on claims so it is strongly recommended that considerable care is taken before making a claim. Reference to the guidance is essential and I suggest keeping a printed copy of the guidance relied on in case of later changes which may adversely impact on a claim already made.

The online locations of current guidance documents are set out below but if you are concerned about any point then do get in touch for advice.

Treasury Direction

Employer’s Guide

Guide to Calculating Claim

Employee’s Guide

For more information please contact Nick Hanning – nha@anthonygold.co.uk

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*