The Government announced its Coronavirus Job Retention Scheme (the ‘Scheme’) on 20th March 2020 [Coronavirus – Job retention Scheme]. There was initially little guidance as to how the Scheme would operate in practice, or when and how employers could utilise the Scheme.
Guidance has subsequently been issued on a piecemeal basis, with a little more light being shed with each update. The most recent update was published on 4 April 2020 and the key new points from the guidance for employers are as follows:
Who can be furloughed and claimed for under the scheme?
We were aware that an employer can claim under the Scheme in respect of furloughed employees who were on the employer’s PAYE payroll on or before 28 February 2020. The updated guidance now confirms that:
- Apprentices can be furloughed in the same way as other employees. They are permitted to continue to train however they must receive at least the Apprenticeship Minimum Wage or National Minimum/Living Wage for any time spent training.
- Shielding Employees (i.e. employees who are shielding in line with public health guidance) can be furloughed if they are unable to work from home and an employer would otherwise have to make them redundant.
- Employees with caring responsibilities, employees who are unable to work because they have caring responsibilities can be furloughed.
- Employees on fixed term contracts can be furloughed. Their contracts can be renewed or extended during the furlough period without breaking the terms of the scheme.
- Non-employees are covered by the Scheme if they are paid via PAYE. This will cover the following categories of individuals; office holders (including company directors), salaried member of LLPs, agency workers and workers who satisfy the definition under the Employment Rights Act 1996.
What is covered under the scheme?
The updated guidance provides further clarification in relation to what is covered under “wage costs” under the Scheme:
- A claim under the Scheme can be made for any regular payments an employer is obliged to pay their furloughed workers. This includes wages, past overtime, fees and compulsory commission payments. Discretionary bonus (including tips) and commission payments and non-cash payments should be excluded.
- The furloughed worker’s salary claimed under the Scheme should not include the costs of non-monetary benefits paid to employees including taxable benefits in kind
- Benefits provided through salary sacrifice schemes (including pension contributions) that reduce an employee’s taxable pay should also not be included in the reference salary claimed for under the Scheme. Normally an employee cannot switch freely out of a salary sacrifice scheme unless there is a life event. HMRC agrees that Coronavirus counts as a life event that would warrant changes to salary sacrifice arrangements.
- Grants to employers under the Scheme do not cover the Apprenticeship Levy and Student Loans, these should continue to be paid as usual.
What are the mechanics of the scheme?
The updated guidance also provides some helpful clarity on the fundamental requirements an employer must put in place in order to access the Scheme and the mechanics of the operation of the Scheme:
- Employers must confirm in writing to their employee that they have been furloughed and a record of this communication must be kept for 5 years.
- Grants will be pro-rated if an employee is only furloughed for part of a pay period.
- Claims should be started from the date that the employee finished work and starts furlough, not when the decision is made, or when they confirm their furloughed status in writing.
- Employees can be furloughed multiple times, but each separate instance must be for a minimum of 3 consecutive weeks.
- If contractually allowed an employee can work for another employer whilst their current employer has placed them on furlough.
Any guidance from the Government is very welcome for employers who are trying to navigate the complexities of furlough and the Job Retention Scheme. There are other issues on which further clarity from the Government would be welcome, for example, holiday and holiday pay during furlough. Hopefully further guidance on these issues will be forthcoming.
The Employment Team at Geldards will keep you abreast of any updated guidance. In the meantime, should you have any queries regarding this update, or any other employment related matters do not hesitate to contact us.