FAQs for employers on the Coronavirus Job Retention Scheme.
This information is intended as general guidance. It relates to a scheme which is not yet in operation. 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, furloughed employees are those who would otherwise have been made redundant or laid off.
2. Are there any categories of employees who are excluded from the scheme?
Anyone who was placed on your payroll after 28 February 2020 will not eligible to participate in the scheme.
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.
5. Can I furlough employees now?
Yes. The scheme is backdated to 1 March 2020, for an initial period of three months.
6. How do I go about doing this?
It will be necessary to decide which employees are being furloughed and advise them that this is happening. You will also have to make clear how much they will be paid during the period they will be absent from work.
7. The government will cover 80% of salary, so do I need to top up the remaining 20%?
There is no requirement under the scheme to top up the remaining 20%. 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.
8. If staff agree to the 80% of salary, am I obliged to increase their 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.
9. What if I only want to furlough some employees?
The scheme allows you to decide how may staff to furlough.
10. 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.
11. Is there a minimum period of furlough?
There is a minimum furlough period of 3 weeks. You will receive no grant if you furlough for less than 3 weeks.
12. 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 or on behalf of the organisation.
13. Do employees accrue annual leave when furloughed?
Yes, as they remain employed.
14. How quickly will the government pay the money that is due?
The government have suggested that money will be paid within a few weeks. However, there is every likelihood that it will take longer to process a very large number of claims.
15. Can I ask staff to work reduced hours and take advantage of the scheme?
If an employee is working reduced hours or working on reduced pay, they will not be eligible for this scheme and you will have to continue paying the employee through your payroll and pay their salary subject to the terms of the employment contract you agreed.
16. Are there any other considerations I should be aware of deciding whether and who to furlough?
When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
17. What figure will be used to calculate the sum to be paid by HMRC for salaried staff?
For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February, should be used to calculate the 80%.
18. What about bonuses and commission for salaried staff?
Commission and bonuses should not be included in the calculation of the sum sought from the scheme for salaried staff.
19. 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 (or engaged by an employment business) for a full twelve months prior to the claim, you can claim for the higher of either:
a. the same month’s earning from the previous year.
b. average monthly earnings from the 2019-20 tax year.
c. 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.
If the employee only started in February 2020, you can use a pro-rata of their earnings so far to claim.
20. Do I require the agreement of staff in order to reduced salaries or wages during furlough?
Unless you have a provision in the contract that entitles you to lay off, or a term in the contract of employment that entitles you to reduce wages, which is very unusual, you will have seek agreement from staff, otherwise you run the risk of a claim for unlawful deduction of wages, breach of contract and constructive dismissal.
21. Can I recover costs of staff who are on maternity, paternity or adoption leave?
If you offer enhanced (earnings related) contractual pay to women 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 or shared parental pay.
22. 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.
23. Where can I get more detail on the 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.