As we noted in our previous blog post here the UK Government announced the new Coronavirus Job Retention Scheme by which employers can apply to HMRC for a grant to cover most of the wage costs (up to 80%) of salary of workers who are temporarily not working but kept on the payroll (furloughed workers) for up to a total of £2,500 per worker each month. The Government has now published further guidance on the scheme.

Which employers can apply under the scheme?

Any employer (regardless of size or sector type) who operates PAYE will be eligible for the scheme. In order to access the scheme an employer will need to designate affected employees as ‘furloughed workers,’ and notify the employees of this change.

Which employees can be furloughed?

All employees including zero hour workers who are paid on the employers PAYE payroll can be furloughed. However the employee must have been on the payroll on 28 February 2020. Any employee who has been made redundant since 28 February can be rehired and placed on furlough. Any new hires since that date cannot be placed on furlough.  In addition an employer cannot claim in relation to any employee who was already on unpaid leave on 28 February.  If an employee is on sick leave or self-isolating and is eligible for statutory sick pay then they should receive SSP for that period and then be furloughed at the end of the sick leave or self-isolation.

What work can an employee do during furlough leave?

A furloughed employee should not be performing any work for the employer during the period. This includes providing services or generating income. This means that if an employee is on reduced hours or days then the employer cannot claim for them under this scheme. The employer has a discretion as to which employees it can place on furlough and in applying any criteria the employer must have regard to equality and discrimination law.

The minimum period of time that an employee can be placed on furlough is three weeks. An employee cannot therefore rotate employees for any period of less than this time.

The guidance does make it clear that an employee can undertake voluntary work or training as long as it does not generate revenue for the employer. If the employee carries out any online training for the employer during the period then the employee must be paid at least the National Minimum Wage of the National Living Wage during the period of the training.

The guidance implies that employees who are on maternity or other forms of parental leave can also be placed in furlough. If the employer offers enhanced contractual earnings related maternity pay then this could also be claimed as a wages cost under this scheme.

What level of salary can the employer claim for?

The employer 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. This means that it will cover the wage costs such as NICs on top of the £2,500 or 80%.

In determining the level of salary this is the employee’s salary on 28 February 2020. Fees, commission and bonuses should not be included. Where the employee has variable pay, then if the employee has been employed (or engaged by an employment business) for a full twelve months prior to the claim, the employer can claim for the higher of either: the same month’s earning from the previous year or average monthly earnings from the 2019-20 tax year. Where the employee has been employed for less than a year, the employer should claim for an average of their monthly earnings since they commenced employment.

As an employee is not working during this time, the guidance has clarified that National Minimum Wage or National Living Wage will not apply to the payments to the employee’s during that period (unless they are carrying out online training).

The employer can choose to top up the payment so that the employee receives their full salary, but the employer will then be responsible for the National Insurance Contributions on that payment. In addition, if the employer pays more than the minimum contributions under the auto enrolment rules the employer will be responsible for making those payments.

Changing terms and conditions

Asking the employee not to work and changing the level of salary will be subject to existing employment law and, depending on the terms of the employment contract, an employer may have to obtain the employee’s consent to such change. The employer will also need to consider whether collective consultation obligations apply.

How does the employer apply?

The guidance sets out the information which the employer must provide in order to make an application. This includes: the ePAYE reference number; the number of employees being furloughed; the claim period (start and end date); the amount claimed; the employers bank details; and the employer’s contact details. The employer needs to calculate the amount it is claiming. The new online portal is not yet available for applications. The Government hopes to have the scheme up and running by the end of April.

What steps should employers be taking now?

Although the portal is not yet up and running employers should be taking the following steps in relation to their employees:

  • Determine which employees are to be placed as furloughed employees, ensuring that they are adopting non-discriminatory selection criteria;
  • Write to those employees confirming that they have been furloughed and keep a record of this communication;
  • Seek agreement to change to the employee’s terms and conditions of employment with regard to reduction in pay;
  • Consider entering into an agreement with the employee to cover this period; and
  • Gather together all information in relation to the employees on furlough leave so that it is able to calculate the amount to be claimed and submit it as soon as the portal is open.

Information on the Job Retention Scheme can be found here



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