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BREAKING NEWS for employers 27 March 2020
On 26 March, the Government issued further details in respect of the Coronavirus Job Retention Scheme (‘the Scheme’). At the moment, we are waiting to see whether this guidance will be the only basis of HMRC’s implementation of the Scheme, or whether legislation will be enacted in addition to this.
When is the Scheme going to be operational?
The Government expects the Scheme to be up and running by the end of April.
What are the eligibility criteria for employers who wish to make a claim?
Any UK organisation with employees can apply, including:
- Businesses
- Charities
- Recruitment agencies (where agency workers are paid through PAYE)
- Public authorities.
To qualify, the organisation must have created and started a PAYE payroll scheme on or before 28 February 2020 and have a UK bank account.
Where a business is being taken under the management of an administrator, the administrator will be able to access the Scheme.
Which employees are eligible for the Scheme?
The rumours were true – although many lawyers and barristers found no evidence of the ’28 February 2020′ rule, and it was presumed to be ‘fake news’, the Government has confirmed that, in order to be eligible for furloughing, an employee must have been on an organisation’s PAYE payroll on 28 February 2020. Employees hired after 28 February 2020 cannot be furloughed in accordance with the Scheme.
The guidance confirms that furloughed employees can be subject to any type of contract, including:
- Full-time contract
- Part-time contract
- Agency contract
- Flexible / zero-hours contract.
The Scheme also covers employees who were made redundant since 28 February 2020, if they are re-hired by their employer.
Is there a minimum period of time for which employees can be furloughed?
Yes. Employees must be furloughed for a minimum of three weeks.
Does the Scheme cover employees who have already been made redundant as a result of Coronavirus (COVID-19)?
Yes, it can. The Scheme covers employees who were made redundant since 28 February 2020, IF they are re-hired by their employer.
Do we have clarity on the application of the £2,500 monthly wages cap and the calculation of wage costs?
Employers will be able to claim for 80% of furloughed employees’ usual monthly wage costs, up to a cap of £2,500 a month, plus the associated Employer National Insurance contribution and minimum automatic enrolment employer pension contributions on that wage.
For full-time and part-time salaried employees, the employee’s actual salary before tax, as of 28 February 2020, should be used to calculate the 80%. The Government has stated that commission and bonuses should not be included, which is rather surprising, and further guidance on this would be useful.
For employees whose pay varies, the following applies:
- If an employee has been employed for a full 12 months prior to the claim, the employer can claim for the higher of either the same month’s earnings from the previous year, or the average monthly earnings from the 2019-20 tax year.
- If an employee has been employed for less than a year, you can claim for an average of their monthly earnings since they started work.
- If an employee only started work in February 2020, a pro-rated calculation of their earnings to date should be used.
The Government has indicated that it will issue more guidance on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions, before the Scheme becomes live.
Do the usual income tax and other deductions apply to the 80% wage?
Yes. Whilst on furlough, an employee’s wage will be subject to the usual income tax and other deductions.
Does the optional 20% ‘top-up’ from employers still apply?
Yes. Employers can choose to provide top-up salary in addition to the monies provided through the Scheme. However, it is important to note that Employer National Insurance Contributions and automatic enrolment contribution on any additional top-up salary will not be funded through this Scheme, neither will any voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3%.
Is the 80% rule subject to the National Living Wage / National Minimum Wage?
Individuals are only entitled to the National Living Wage / National Minimum Wage (NLW / NMW) for the hours they are working.
As a result, furloughed workers, who are not working, must be paid 80% of their salary, subject to the £2,500 cap, even if, based on their usual working hours, this would be below NLW / NMW.
Can an employee continue to work for the organisation whilst on furlough?
No. In order to be eligible for the Scheme, an employee cannot undertake work for or on behalf of the organisation. This includes providing services or generating revenue.
However, a furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for the employer.
If employees are required to e.g. complete online training courses whilst they are furloughed, then they must be paid at least the National Living Wage / National Minimum Wage for the time spent training, even if this is more than the 80% of their wage that will be subsidised.
Will the Scheme apply to those employees who have been put on reduced hours?
No. Employees on reduced hours / short-time working will not be eligible for the Scheme.
How do employers communicate a decision to furlough to their employees?
Employers should write to the relevant employees, confirming that they have been furloughed, and keep a record of this communication. When employers are making decisions in relation to the process, including deciding who to select for furlough, equality and discrimination laws will apply in the usual way.
We have had a number of enquiries regarding selection of employees for furloughing. Rather like redundancy selection, we would advise you to base it on objective criteria where possible. Otherwise, in a situation where an employee moves from furlough to redundancy, they might question their selection for furlough, which has, in turn, made them more vulnerable to redundancy. As always, we would advise that you are alive to risks in respect of those who have protected characteristics, such as disability, sex or age.
Can employees on unpaid leave be put on the Scheme?
Yes, as long as they were placed on unpaid leave after 28 February 2020.
Can employees on Statutory Sick Pay be furloughed?
Employees who are on sick leave, or self-isolating, should continue to be paid Statutory Sick Pay until they cease to do this, at which point they can be furloughed.
Importantly, employees who are shielding in line with public health guidance can be placed on furlough.
What if an employee has more than one job?
If an employee has more than one employer, then they can be furloughed for each job. The £2,500 cap applies to each employer individually.
What happens if an employee is on maternity leave?
The Statutory Maternity Pay provisions will continue to apply as normal.
However, the guidance has indicated that, if an employer offers enhanced, earnings related, contractual pay to women on maternity leave, this is included as a ‘wage cost’ which can be claimed through the Scheme. This guidance is rather unclear, as it suggests that women on maternity leave can be furloughed, but there is no express confirmation of this, or how the mechanics would work in practice.
Public sector organisations
It is expected that the Scheme will not be used by many public sector organisations, given that the majority of their employees will continue to provide essential public services during the Coronavirus outbreak.
Where organisations receive public funding for staff costs, and that funding is continuing through the crisis, the Government expects employers to use that money to continue to pay staff and not furlough them. Importantly, this also applies to non-public sector employers who receive public funding for staff.
Finally, organisations which are receiving public funding specifically to provide services in response to Coronavirus (COVID-19) are not expected to utilise the Scheme.
How can I claim under the Scheme?
To claim, employers will need:
- ePAYE reference number.
- The number of employees being furloughed.
- The claim period (start and end date).
- Amount claimed (per minimum length of 3 week furloughing).
- Bank account number and sort code.
- Contact name and phone number.
Employers will need to calculate the claimed amount themselves. HMRC is retaining the right to retrospectively audit submitted claims.
Employers will only be able to submit one claim every three weeks (in line with the minimum period of furlough leave). Claims can be backdated to 1 March 2020, if applicable.
Once HMRC has received the claim, and confirmed eligibility for the grant, it will pay the monies via BACS payment into a UK bank account.
OTHER UPDATES
Coronavirus Act receives Royal Assent
On 25 March 2020, the Coronavirus Act 2020 received Royal Assent.
In essence, it consolidates many of the measures which have already been announced by the Government in response to the virus but, until this point, were not strictly law.
The Act includes the following provisions:
- Modification of the Statutory Sick Pay (‘SSP’) regime, so that SSP is payable from the first day of sickness or self-isolation, and can be funded by HMRC; and
- Creation of ’emergency volunteering leave’, which will enable individuals to take time off work to volunteer in health or social care, and receive compensation for loss of earnings (more about this, below).
The majority of the Act is now in force, but the SSP rule changes and the emergency volunteering leave provisions both require secondary legislation. In essence, the Coronavirus Act gives Ministers the power to make appropriate regulations. As a result, although the above provisions are technically in force, nothing will change until the secondary legislation is made.
The Act provides that ‘temporary’ provisions, such as those relating to SSP and the right to emergency volunteering leave, will automatically expire after two years. Important to note, however, is that the protection from detriment and dismissal for having taken emergency volunteering leave, as well as the protection of employees’ terms and conditions of employment, will not automatically expire.
Emergency Volunteering Leave
This has been introduced to allow workers to temporary leave their normal job and volunteer for the NHS or social care sector. The scheme has had an unprecedented response, with over 400,000 individuals signing up in the first 24 hours since the announcement.
An ‘appropriate authority’; for example, a local authority, an NHS Commissioning Board or the Secretary of State for Health and Social Care, can certify an individual to act as an emergency volunteer. Subsequent to this, the individual will be able to take the leave if they provide their employer with three working days’ notice, and the certificate.
Individuals can take one period of leave during the ‘volunteering period’, which is one 16 week period beginning on the day that the relevant provisions in the Act are brought into force. The period of the individual’s leave must be either two, three or four weeks’ long. There is no provision for employers to refuse leave.
There is no obligation, during such a period of volunteering leave, for you as an employer to pay wages. However, an employee on emergency volunteering leave will be entitled to the following:
- The benefit of all the terms and conditions of employment (except remuneration) which would have applied had the employee not been absent.
- A right to return from leave to the job in which he or she was employed before the absence, on no less favourable terms and conditions.
- Protection from detriment / dismissal, in that it will be unlawful to subject an individual to a detriment for having taken (or sought to take) emergency volunteering leave, and it will be automatically unfair to dismiss an employee for the same reason.
The Act requires the Secretary of State to establish arrangements for paying compensation to volunteers in respect of loss of earnings, as well as travel and subsistence expenses. Whether this will be subject to a cap is not currently clear.
Employees will not be able to apply for the scheme where they are:
- Employed by a business which has fewer than 10 members of staff
- A civil servant
- Working in legislature or
- A police officer
Updated Instructions on Business Closures
The Government has updated its instructions regarding business closures. As a result, we have amended our guidance, which was initially issued on 24 March 2020. The updated version can be found on our website by clicking here.
Changes include confirmation that planning regulations now allow restaurants, cafes and pubs to offer hot food takeaway, and there is further helpful guidance on the treatment of tradespeople who carry out work in people’s homes.
New Government Package for Self-Employed Individuals
The Chancellor has announced headline details of a new rescue package for the self-employed, as follows:
- An income support scheme will pay self-employed individuals a taxable grant worth 80% of average monthly income, capped at £2500 per month.
- This will be calculated by taking the average of income over the last three years.
- Self-employed individuals claim the grant whilst continuing to do business (the opposite of furlough leave).
- The scheme is open to anyone with trading profits of up to £50,000. This covers 95% of self-employed individuals.
- To qualify, self-employment must be an individual’s ‘main job’, in that they must make most of their income from it.
- Individuals must have submitted a tax return for 2019, or do so within four weeks from 26 March 2020.
The scheme will be open for at least 3 months, but is unlikely to be operational before the end of June. Therefore, unfortunately, it will not provide immediate help to those self-employed individuals who are struggling with cash flow.
Acas publishes new guidance on working from home
In response to the large shift in the number of employees working from home, in order to limit the spread of Coronavirus, Acas (Advisory, Conciliation and Arbitration Service) has published new guidance for employers. It covers issues such as health and safety, mental and physical health, equipment and technology and childcare issues.
The guidance can be found by clicking here.
Suspension of Gender Pay Gap reporting
In the light of the recent crisis, the Government Equalities Office and the Equality and Human Rights Commission have suspended the reporting deadlines for the 2019-20 reporting year.
Prior to this announcement, Gender Pay Gap reports would otherwise have been due from public sector bodies by 30 March, and from large private sector employers by 4 April 2020.
The Government announcement can be found by clicking here.
[Content correct as at 27 March 2020]
If you would like to discuss any of the issues raised in this article, or have other concerns about the impact of Coronavirus, please contact Rachael Lloyd, James Baker or Andrew Tobey in Michelmores’ Employment team.
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This article is for information purposes only and is not a substitute for legal advice and should not be relied upon as such. Please contact our specialist lawyers to discuss any issues you are facing.
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