Coronavirus Job Retention Scheme: full government advice released

Please Note: All information correct at time of writing on 27 March 2020. We do our very best to make sure our information is as up to date as possible, but we’d encourage you to check out our latest articles and to check the government website for updates as they happen.

Following Chancellor Rishi Sunak’s announcement on Friday 20 March, that the government will be releasing the Coronavirus Job Retention Scheme, the government has now released their full guidance on how they expect the scheme to run.

This is following a week of speculation and unknowns, and will now allow businesses to better prepare for using the scheme, protecting their businesses and helping their people.

You can read the government’s full guidance here, and below we’ve gathered the most important points from their official documents to keep you in the know.

When does the scheme start?

This is a temporary scheme which will run for three months from 1 March 2020. When it was announced the Chancellor said he would extend the scheme if this was necessary. The scheme is expected to be up and running by the end of April (it’s unclear as to whether this is when the first payments will be received – which was the intention when the scheme was announced – or when the online portal will be set up for employers to input details of their claim).

Who is it for?

Any UK organisation with employees whose business has been severely affected by the coronavirus. They must have created and started a PAYE payroll business scheme on or before 28 February 2020 and have a UK bank account. This includes:

  • businesses
  • charities
  • recruitment agencies (agency workers paid through PAYE)
  • public authorities

If a company is in administration (as opposed to liquidation), the administrator can make a claim under the scheme.

These organisations can use the scheme at any time during the three-month period.

Public Sector organisations and those who are wholly or partly funded by the public sector

The government does not expect public sector organisations to use the scheme as most will be continuing to provide essential public services.

Where non-public sector employers receive public funding for staff costs, and that funding is continuing, the government expect employers to use that money to continue to pay staff in the usual fashion – and not furlough them.

We saw this with the dental sector yesterday but of course, in that case, it seems that this continued funding is conditional on continuing to pay people at the previous level and making them available and supporting their redeployment to other duties necessary to fight the coronavirus. Many dental practices rely upon both NHS and private income to meet staff costs.

The guidance states “In a small number of cases, for example where organisations are not primarily funded by the government and whose staff cannot be redeployed to assist with the coronavirus response, the scheme may be appropriate for some staff.”

However, the letter sent out by the NHS yesterday made it clear that if dental practices continued to receive NHS funding, they would not be able to use the job retention scheme and could not furlough employees. We will, therefore, have to wait to see whether any exceptions to this are agreed between the British Dental Association and the NHS.

What can they claim?

Employers can claim 80% of furloughed employees’ usual monthly wage costs, up to £2,500 a month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on that wage. Fees, commission and bonuses should not be included.

The employer must pay a minimum of 80% to the employee but is not obliged to top this up.

How is pay calculated?

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%.

What if pay varies?

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
  • average monthly earnings from the 2019-20 tax year

If the employee has been employed for less than a year, their employer can claim for an average of their monthly earnings since they started work. If the employee only started in February 2020, employers should calculate their earnings so far pro-rata to claim.

Employer National Insurance contributions and pension contributions

Employers remain liable for Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on behalf of their furloughed employees, but they can make a claim for this under the scheme. Once they’ve calculated the employee’s salary they can claim for, they must then work out the amount of Employer National Insurance contributions and minimum automatic enrolment employer pension contributions they can claim.

If the employer chooses to top-up salary above the 80%, they will not be able to claim Employer National Insurance Contributions and automatic enrolment employer pension contributions on the top-up element.

If the employer makes voluntary automatic enrolment contributions above the minimum mandatory employer contribution of 3%, the additional element can’t be claimed through the system.

The guidance states that further details will be released on how employers should calculate their claims for Employer National Insurance Contributions and minimum automatic enrolment employer pension contributions before the scheme becomes live.

Is furlough pay subject to deductions?

While on furlough, the employee’s wage will be subject to the usual income tax and other deductions. It will also be subject to automatic enrolment pension contributions on qualifying earnings (unless they have chosen to opt-out).

Eligible employees

Employees must have been on PAYE payroll as at 28 February 2020 and no claim can be made for employees who started their employment after this date. A claim can be made for employees who were made redundant since 28 February 2020, if they have been ‘rehired’ by their employer.

Eligible employees can be on any type of contract, including:

  • full-time employees
  • part-time employees
  • employees on agency contracts
  • employees on flexible or zero-hour contracts

It is worth pointing out that the scheme refers to employees only but please bear in mind that this is a scheme derived around the PAYE system and for tax purposes, people can only be employed or self-employed.  They are therefore basing this around people who pay PAYE.

During a period of furlough, the employee can do no work, and this includes providing services or doing anything which would generate revenue for the organisation.

Does the scheme cover agency workers?

Yes, if they are not working. The agency business would make the claim.

Can a claim be made for those on short-time working?

As expected, no claim can be made for those working reduced hours. This is because the purpose of the scheme is to avoid job losses and if some work is available to the employee, presumably their job is not in jeopardy.

Do employees need to consent to be put on furlough leave?

Yes, the guidance makes it clear that this should be discussed with the employee and the change made by agreement. For businesses with a contractual right to lay off, this will usually be a formality as the employee will be much better off on furlough. Be aware, the guidance reminds employers that when they 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.”

The guidance also points out that if sufficient numbers of staff are involved, this may require collective consultation. We've not seen this referenced previously but it's likely the usual rules regarding collective consultation timeframes would be waived by agreement given the alternatives are lay-off (if it is in the contract) or redundancy.

Does it need to be confirmed in writing?

Yes, to be eligible employers must write to their employee confirming that they have been furloughed and keep a record of this.

Can you furlough only part of the workforce?

Yes but be mindful that the employees on furlough must not do any work for the business.

Can you claim for an employee on unpaid leave?

No, unless they were placed on unpaid leave after 28 February.

Can you claim for an employee on Statutory Sick Pay?

The guidance clears up this very common question and the answer is, it depends on why they are on sick leave.

Employees on sick leave or self-isolating should get Statutory Sick Pay but can be furloughed after this. This will cover employees on seven-day symptom self-isolation, 14-day household self-isolation and those who are sick for non-coronavirus related reasons. Once their period of sick leave is over, they can be furloughed.

Employees who are shielding “in line with public health guidance” can be placed on furlough. This part of the guidance will cause some confusion because there’s a great deal of confusion between Public Health England guidance (mirrored in Scotland, Wales and N Ireland) and more general NHS advice.

This was not helped by the identification of three higher risk groups, pregnant women, those over 70 and those with underlying medical conditions, but the imposition of 12-week self-isolation (shielding) only on those who have been notified that they must shield.

If in doubt, ask for confirmation that the employee has been told they must shield, as this is likely to be required by the scheme. The matter should always be handled sensitively as all three groups are of course covered by protected characteristics.

Can you claim if your employee is on Maternity Leave, contractual adoption pay, paternity pay or shared parental pay?

The guidance is ambiguous on this. It states that employees who qualify for Statutory Maternity Pay, will still be eligible for 90% of their average weekly earnings in the first 6 weeks, followed by 33 weeks of pay paid at 90% of their average weekly earnings or the statutory flat rate (whichever is lower). The statutory flat rate is currently £148.68 a week, rising to £151.20 a week from April 2020.

This clarifies that when on maternity leave, the employee should not be paid on a furlough basis but in accordance with normal maternity leave rules. It goes on to say that if an employer “offers enhanced contractual pay to women on maternity leave, this can be included as wage costs that you can claim through the scheme…The same principles apply where the employee qualifies for contractual adoption, paternity or shared parental pay”.

What it does not make clear is whether a claim for statutory maternity pay can also be made through the scheme.

The guidance also points out the compulsory maternity leave periods – two weeks immediately following the birth of the baby (or 4 weeks if the employee works in a factory or workshop). This is presumably anticipating that many employees will want to cut short their maternity leave and go on to furlough as quickly as possible.

However, employees should be reminded that if they request an early return, once they have brought their maternity leave to an end, they can’t restart it (it may be that taking shared parental leave may be a better option for them). Remember that employees must give 8 weeks’ notice if they want to bring their maternity leave to an end earlier, but the employer can agree to accept a shorter notice period.

What if an employee has more than one employer?

Each job is treated separately and they can be furloughed for each job. The cap will apply to each employer individually. Although the scheme does not mention this, we do not think this will cover employers who have employees on different contracts for different aspects of their work (common in contract cleaning for example).

The fundamental principle of furlough is that the employee must do no work for the employer and therefore a situation for example where an employee is employed by company B on one contract to clean a school and on another contract to clean a GP surgery, and work has temporarily ceased at the school, they could not furlough on that contract and continue working at the surgery. This situation is more akin to short-time working which is not covered by the scheme.

Can a furloughed employee do volunteer work or training?

Yes, a furloughed employee can take part in volunteer work or training, as long as it does not provide services to or generate revenue for, or on behalf of the business.

However, the guidance states “if workers are required to, for example, complete online training courses whilst they are furloughed, then they must be paid at least the NLW/NMW for the time spent training, even if this is more than the 80% of their wage that will be subsidised”.

This means that any time spent on training whilst on furlough will be treated as work for NMW purposes and therefore if payment of the 80% subsidy means the employee would come under the NMW, the employer must top it up to ensure NMW is met. Apart from this, the National Minimum Wage rules will not apply to employees on furloughed leave as they are not actually working.

Is there a minimum period of furlough?

Yes, there is a minimum period of three weeks. There is nothing in the guidance which would preclude putting someone on furlough for three weeks, having them return to work and then putting them on a further period of furlough (which again would have to be a minimum period of three weeks). However, you could not have someone on furlough for a week, bring them back for a few days and then furlough them again.

What information will the employer need to provide to make a claim?

The employer will have to provide the following information:

  • their PAYE reference number
  • the number of employees being furloughed
  • the claim period (start and end date)
  • the amount claimed (per the minimum length of furloughing of 3 weeks
  • their bank account number and sort code
  • their contact name and phone number

How often can a claim be submitted?

An employer can only submit one claim at least every 3 weeks, which is the minimum period an employee can be furloughed (claims can be backdated until the 1 March if applicable).

What will happen after a claim is made?

HMRC will check the employer is eligible for the grant and will pay it via BACS payment to a UK bank account. They retain the right to retrospectively audit all aspects of the claim.

The guidance says the employer should make their claim in accordance with actual payroll amounts at the point at which they run their payroll or in advance of an imminent payroll.

This seems to suggest that there is no requirement to evidence these monies have actually been paid to the employee but please bear in mind, it may be several weeks before the employer receives the grant and it's unlikely that it's envisaged that employees would be left without payment throughout this time.

Can the employer terminate after the scheme ends?

Yes, an employer can make a decision at that point as to whether the employee can return to work or whether it is necessary to consider redundancy. Normal employment procedural rules will apply, as they do throughout the period of furlough.

Tax Treatment of the Coronavirus Job Retention Grant

The guide makes it clear that payments received by a business under the scheme are made to offset these deductible revenue costs. They must, therefore, be included as income in the business’s calculation of its taxable profits for Income Tax and Corporation Tax purposes, in accordance with normal principles. Businesses can deduct employment costs as normal when calculating taxable profits for Income Tax and Corporation Tax purposes.

Questions about the Coronavirus Job Retention Scheme?

Now that the full government guidance on the scheme is here, it’s going to be a lot easier for businesses to establish their next step when it comes to protecting their business and their staff.

If you’re a Citation client and you’ve got questions about just how the Coronavirus Job Retention Scheme will apply to you you can call our experts on our 24/7 advice line on 0345 844 4848.

Not yet a client of ours? You can give our friendly team a call on 0345 844 1111 to have a chat about where you’re at now and what we can help you get in place to get you through the next few months. Or, fill out your details in the form opposite and we can give you a call when it suits you.

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