FAQs for employers on the Coronavirus Job Retention Scheme.
This information is intended as general guidance. If you have any specific issues, we would strongly advise you to seek legal advice.
1. The scheme means that employees can be “furloughed”. What exactly is furlough?
It follows a term that is commonly used in the US, where an employer chooses to insist that an employee does not work. Under the scheme, an employee is furloughed if they do not work because of circumstances arising as a result of COVID-19.
2. Are there any categories of employees who are excluded from the scheme?
You can claim for furloughed employees who were employed on 19 March 2020 and who were on your PAYE payroll on or before 19 March 2020. You must have a relevant PAYE scheme registered with HMRC.
3. Which employers does the scheme apply to?
All UK businesses are eligible, which includes limited companies, sole traders, charities and partnerships.
4. Which employees can be furloughed under the scheme?
All employees, including those on zero hours contracts. The scheme does not apply to those who are self-employed / independent contractors – a separate scheme applies to them.
5. How do I furlough employees?
It will be necessary to decide which employees are being furloughed and advise them that this is happening. Agreement should be reached, and this must be confirmed in writing. You will also have to make clear how much they will be paid during the period they will be absent from work.
6. How long does an employee need to be furloughed for?
Until the end of June 2020, any employees you place on furlough must be furloughed for a minimum of 3 consecutive weeks. Employees can be furloughed multiple times, but each separate instance must be for a minimum of 3 consecutive weeks.
However, the scheme will close to new entrants from 30 June 2020. After this date, you will only be able to furlough employees who you have already furloughed for a full three week period prior to 30 June 2020.
This means that the final date by which you can furlough an employee for the first time is 10 June 2020, in order for the three week furlough period to be completed by 30 June 2020.
You will have until 31 July 2020 to make any claims in respect of the period to 30 June 2020.
7. What happens after the end of June?
From 1 July 2020 the scheme will only be available to you in respect of employees you have previously furloughed under the scheme.
“Flexible furlough” will then be allowed. You will be able to bring back to work employees who have previously been furloughed for any amount of time and any shift pattern, while still being able to claim a grant for their normal hours not worked. You must agree with the employee any new flexible furloughing arrangement and confirm that agreement in writing.
8. What will the government pay until the end of July?
Until the end of July 2020, the government will pay 80% of wages up to a cap of £2,500 as well as employer National Insurance Contributions (ER NICs) and pension contributions for the hours the employee doesn’t work.
9. Do I need to top up the remaining 20%?
There is no requirement under the scheme to top up the remaining 20% of salary. However, unless the contract of employment entitles you to pay a reduced sum of money, not paying full salary will almost certainly be a breach of contract. Therefore, you should seek agreement on any reduction in salary.
10. What will the government pay from August onwards?
In August, the government will pay 80% of wages up to a cap of £2,500. However, you will have to pay ER NICs and pension contributions for the hours the employee does not work.
In September, the government will pay 70% of wages up to a cap of £2,187.50. You will have to pay ER NICs and pension contributions and 10% of wages to make up an 80% total up to a cap of £2,500.
In October, the government will pay 60% of wages up to a cap of £1,875. You will have to pay ER NICs and pension contributions and 20% of wages to make up an 80% total up to a cap of £2,500.
Again, you should seek agreement for any reduction in salary (if you do not top up to 100%).
11. What do I include when calculating wages to claim back from HMRC?
The amount you should use when calculating the relevant percentage of your employees’ wages is regular payments you are obliged to make, including non-discretionary overtime, non-discretionary commission payments and piece rate payments.
12. What figure will be used to calculate the sum to be paid by HMRC for staff whose wages vary?
If the employee has been employed continuously from 6 April 2019, you can claim the highest of:
- the relevant percentage of the same month’s wages from the previous year (up to the caps set out above); and
- the relevant percentage of the average monthly wages for the 2019/2020 tax year (up to caps set out above).
If the employee started their employment after 6 April 2019, you can claim based on the relevant percentage of the average of their monthly earnings since they started work.
13. Am I obliged to increase employees’ salary again when business resumes and they are back at work?
Yes – as soon as they are no longer covered by the scheme, their salary reverts to normal.
14. What if I only want to furlough some employees?
The scheme allows you to decide how many staff to furlough.
15. Do I have to consider furloughing employees first, as an alternative to redundancy?
You should consider the option of designating employees as furloughed, before deciding whether to make them redundant.
16. Can I ask the employee to carry out some work during furlough?
To be eligible for the subsidy, when on furlough an employee cannot undertake work for you. They are allowed to undergo training or volunteer for another organisation.
17. Do employees accrue annual leave when furloughed?
Yes, as they remain employed.
18. Are there any other considerations I should be aware of deciding whether and who to furlough?
When you are making decisions in relation to the process, including deciding who to designate as furloughed, equality and discrimination laws will apply.
19. Can I recover costs of staff who are on maternity, paternity or adoption leave?
If you offer enhanced contractual pay to employees on maternity leave, this is included as wage costs that you can claim through the scheme. The same principles apply where your employee qualifies for contractual adoption, paternity, shared parental or parental bereavement pay.
20. Am I entitled to hold back anything that I receive in order to cover additional costs that I have?
You must pay the employee all the grant you receive for their gross pay. No fees can be charged from the money that is granted.
21. Where can I get more detail on the scheme?
https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme
How can McGrade & Co. help?
As a firm of solicitors dealing only with employment law, you can be confident that we have a leading understanding of legal issues that arise in the workplace. Our specialised position is even more valuable at a time of unprecedented change in employment practices during the COVID-19 pandemic.
We advise on the full range of employment issues, from the stage of recruitment through to employment tribunal proceedings and appeals. We will ensure your case is dealt with as quickly and efficiently as possible.
Our priority is to resolve disputes quickly and to enable those involved to put the difficulties behind them. If you choose to instruct us, we will focus on how matters can be resolved. If we are asked to advise on a grievance, we will try to find a solution that avoids the need for employment tribunal proceedings, where possible.
If employment has come to an end, and we can negotiate severance terms that are acceptable to both parties, we will do so. If the matter can only be resolved by employment tribunal proceedings, we will use our experience and expertise to ensure your case is fully prepared and well argued before the tribunal.
To find out more about the particular services we offer and how we can help you, please contact us on 0141 221 4488.
24 April 2023
Giles Woolfson
