NOTE: See the latest article “Coronavirus Job Retention Scheme | May 2020 Update” which relates to the Job Retention Scheme having been extended until the end of October 2020.
Please note, that the Coronavirus Job Retention Scheme | March 2020 Update article below has now been superseded by the information mentioned above.
Following the government announcement on Thursday 26th March 2020, we have updated our guidance relating to the Coronavirus Job Retention Scheme.
It also includes information regarding the update to the Working Time Regulations in relation to carrying forward annual leave accrued during furlough due to the Coronavirus.
Coronavirus Job Retention Scheme
- Open to all employers (inc businesses, charities, recruitment agencies (agency workers paid through PAYE) and public authorities) for at least 3 months starting 1 March 2020.
- A portal will be available for employers to claim 80% of employees’ usual monthly wage costs, up to £2500 pm, plus the associated Employer NI contributions and minimum auto enrolment employer contributions on that wage.
- Expect portal to be up and running for claims from end April.
- Furloughed employees must have been on your PAYE payroll on 28 February 2020 and can be full time, part time, employees on agency contracts and employees on flexible or zero hours contracts.
- The scheme also covers employees who were made redundant since 28 February 2020 if they are rehired by their employer.
- Employees who are working on reduced hours or for reduced pay will not be eligible.
- Employees on unpaid leave cannot be furloughed unless placed on unpaid leave after 28 February.
- Employers need to discuss with their staff and make any changes to the employment contract by agreement.
- When making decisions relating to furlough equality and discrimination laws will apply in the usual way.
- To claim the subsidy, employers need to write to employees confirming they have been furloughed and keep a record of the communication.
- You do not have to furlough all employees, but those who are furloughed must not undertake any work for you.
The minimum amount of time an employee can be furloughed for is 3 weeks. Therefore, you can only submit one claim at least every 3 weeks.
Employers will receive 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.
Employers must pay their employee the lower of 80% of their regular wage or £2,500 per month. An employer can choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
As individuals are only entitled to the National Living Wage (NLW)/National Minimum Wage (NMW) for the hours they are working, the regulations do not apply to furloughed workers who are not working. However, the exception is if they are required to undertake online training courses while being furloughed. If so, they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of the wage that will be subsidised.
Calculating the wage
For full and part time employees: the employee’s actual salary before tax as of 28 February 2020 should be used to calculate the 80%. Fees, commission and bonuses should not be included.
For employees with variable pay: if the employee has been employed for a full twelve months prior to the claim you can claim for the higher of either:
- The same month’s earnings from the previous year OR
- An average of their monthly earnings from the 2019-20 tax year.
If the employee has been employed for less than a year you can claim for an average of their monthly earnings since they started work.
The wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings, unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
Once the government closes the scheme employers will have to decide if they have work for the employees to return to. If not, it may be necessary to consider termination of employment (redundancy).
Questions and Answers
What if an employee is on Statutory Sick Pay (SSP)?
Employees on sick leave or self-isolating should get SSP but can be furloughed after this.
Employees who are shielding in line with public health guidance can be placed on furlough.
What if my employee has more than one job?
Employees can be furloughed for more than one job. Each job is separate, and the cap applies to each employer individually. However, an employee cannot work for his/her employer during the hours they have been furloughed from.
What about volunteer work or training?
An employee can participate in volunteer work or training as long as it does not generate revenue for or provide services to your organisation.
If employees are required to eg complete online training courses while furloughed then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that is subsidised.
What about employees on maternity leave, contractual adoption pay, paternity pay or shared parental pay?
Individuals who are on or who plan to take maternity leave must take at least 2 weeks off work (4 weeks if in a factory or workshop) immediately following the birth of their baby.
If an employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance (MA) the normal rules apply, and they can claim up to 39 weeks of statutory pay/allowance. Therefore, those who qualify will still receive 90% of their average weekly earnings in the first 6 weeks followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory rate (whichever is lower).
If you provide enhanced earnings-related contractual pay to women on maternity leave this is included as wages costs that you can claim through the scheme.
The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
What about holiday accrual during Furlough Leave?
The government announced on 27th March 2020 that there will be changes in the Working Time (Coronavirus) (Amendment) Regulations 2020 to allow workers who have not taken all of their statutory annual leave entitlement due to COVID-19 to carry it over into the next 2 leave years.
The regulations will allow up to 4 weeks of unused leave to be carried into the next 2 leave years.
For further information click on the following links:
- Government Guide for Employers – Coronavirus Job Retention Scheme
- Acas Guide to Using Holiday During Coronavirus Disruption Period.
For more articles and ongoing updates visit the HR Solutions’ dedicated page, ‘Coronavirus Advice and Guidance for Employers’. HR Solutions are here to provide you with support and advice on any employment related issues; to find out more call us on 0844 324 5840 or contact us online.
This article was updated by HR Solutions on 30 March 2020.