The Government introduced the Coronavirus Job Retention Scheme (CJRS) as a direct response to the economic impact of COVID – 19 on businesses.
The main purpose of the scheme is to help businesses that been severely affected by the coronavirus crisis maintain their current workforce.
The scheme enables employers to apply to HMRC for a grant to cover 80% of employees’ salaries.
Employers are only able to claim in respect of those employees who have been furloughed.
Employees must not perform any work for their employer while they are on furlough as this is expressly prohibited under the scheme.
The scheme has been open from 1st March until 30th June unless the Government extends it further.
Employers must use an online portal to make a claim which has been available since 20th April 2020.
Coronavirus Job Retention Scheme FAQ’s
Jump to your question:
- What is the Coronavirus Job Retention Scheme?
- How long is the Scheme open for?
- Do employers have to repay any money received under the Scheme?
- What does furlough mean?
- How long must an employee be furloughed for?
- Which employers are eligible?
- Which employees are covered under the Scheme?
- Do you need to obtain an employee’s written agreement to be furloughed?
- How do you put employees on furlough?
- What records should you keep?
- Can an employee work for you while being furloughed?
- Can an employee demand that you place them on furlough?
- Can you rotate furlough between your employees?
- Can you furlough employees multiple times?
- Are furloughed employees allowed to do any voluntary work or undertake training?
- What salary costs are covered by the CJRS Scheme?
- Are you legally required to top up the remaining 20%?
- Which pay period should you use?
- What do you include in the salary calculation?
- How do you calculate pay for employees with irregular hours such as those zero-hour/casual contracts?
- Do you have to pay national insurance and pension contributions for furloughed employees?
- Can employees on sick leave, self-isolating or shielding be furloughed?
- Can you furlough employees on unpaid leave?
- Can you furlough an employee who needs to stay at home to look after their children?
- Can a furloughed employee work for another employer?
- Can an employee be furloughed if they have two jobs with different employers?
- Does annual leave accrue holiday during furlough?
- Can you compel an employee take annual leave while on furlough leave?
- How do you deal with bank holidays that fall during furlough leave?
- Can you furlough employees who were made redundant prior to the Coronavirus Job Retention Scheme being announced?
- Can you furlough fixed-term employees?
- Can employees on furlough be made redundant?
- Can you furlough employee’s during their notice period?
- Can Directors be furloughed?
- Can an employee on maternity leave, or other statutory family leave be furloughed?
- How do you calculate statutory pay like SMP for an employee who has been furloughed prior to taking statutory family-related leave?
- Can foreign nationals with visas be furloughed?
- Can self-employed individuals be furloughed?
What is the Coronavirus Job Retention Scheme?
It is a temporary scheme introduced by the UK Government to help those employers who have been adversely affected by the Coronavirus outbreak.
Employers can claim 80% of an employee’s salary up to a maximum of £2,500 per month, plus the associated Employer National Insurance contributions and minimum automatic enrolment employer pension contributions on a subsidised wage.
To make a claim, affected employees must be designated as a “furloughed worker” and be placed on furlough leave with confirmation of this in writing.
You should also obtain an employee’s consent to reducing their pay, ideally in writing if you do not choose to top up their salary.
How long is the Scheme open for?
The Scheme has been open since 1 March 2020 and is due to end 30 June 2020 unless it is extended further by the Government.
Do employers have to repay any money received under the Scheme?
No they don’t.
However, HMRC does have the right to audit all claims made under the Scheme retrospectively and will have the power to claw back any fraudulent claims
What does furlough mean?
The term furlough does not have any prescribed definition in law.
However, in the context of the Job Retention Scheme “furloughed”, means where an employee is kept on the payroll but placed on a temporary leave of absence where they are not required to work.
How long must an employee be furloughed for?
An employee must be furloughed for a minimum of three consecutive weeks.
Which employers are eligible?
The Scheme is open to all UK employers regardless of their size who have a UK bank account, had a PAYE payroll system on or before the 19 March 2020 and have enrolled for PAYE online
This includes the majority of businesses, charities, not for profit organisations, public sector organisations and also recruitment agencies with agency workers paid through PAYE.
If a company is in administration, the administrator can also apply for support under the Scheme.
Where employers are receiving public funding, they should use these funds to continue to pay staff and not furlough them.
Which employees are covered under the Scheme?
The Scheme applies to all employees on the employer’s PAYE payroll on or before 19 March 2020 engaged on any type of contract including full-time, part-time, flexible or zero-hours contracts and those on agency contracts.
It also applies to Apprentices, salaried company directors and salaried LLP members provided they are paid via PAYE.
Do you need to obtain an employee’s written agreement to be furloughed?
The Treasury directions issued on 15 April stated that that there must be an agreement in writing between an employer and an employee for the employee to cease all work for the employer.
We, therefore, believe the safest approach is obtained their consent using detailed furlough agreement.
If you require a furlough agreement, then please contact us.
How do you put employees on furlough?
You will need to do the following:
- Decide which employees you wish to furlough using fair and objective criteria similar to that used in a redundancy selection exercise.
- If appropriate consult with trade unions or employee representatives or trade unions.
- Then obtain the consent of each affected employee in writing using a furlough agreement that set outs confirmation of their furlough status, the duration of furlough leave, that their pay will be reduced. They will cease all work while furloughed.
- Submit information to HMRC about furloughed employees via the online portal
- Ensure that the furloughed employees while they are furloughed
What records should you keep?
You must keep a copy of any written communications with an employee about being furloughed for up to for five years including any copies of a furlough agreement.
You should also keep a record of all claims made under the Scheme.
Can an employee work for you while being furloughed?
No, they cannot do any work for you or another linked or associated business.
Employees are being encouraged to report their employer if they are being asked to work while on furlough, or if they are aware of fraudulent behaviour concerning the Scheme
Can an employee demand that you place them on furlough?
No they cannot.
They can make a request, but you do not have to agree. It is your decision as to which employees to place on furlough.
Normal employment law principles still apply, so you need to ensure that decisions are not discriminatory.
Can you rotate furlough between your employees?
Yes as long as each employee is furloughed for a minimum of three consecutive weeks at a time.
Can you furlough employees multiple times?
Yes, they can be furloughed multiple times as long as each period of furlough is for a minimum of three weeks.
Whenever you bring an employee back off furlough and wish to furlough them again, you must notify them in writing.
Are furloughed employees allowed to do any voluntary work or undertake training?
Yes, but you must ensure that any such activities do not provide services to, or generate revenue for, your business.
If you require any furloughed employees to undertake training, then they must be paid no less than the National Living Wage/National Minimum Wage.
What salary costs are covered by the CJRS Scheme?
80% of an employee’s usual monthly wage costs or £2,500 per month, whichever is lower.
You can also claim for the national insurance contributions and the minimum automatic enrolment employer pension contributions you are liable to pay.
Are you legally required to top up the remaining 20%?
No you are not, but you can do so if you wish.
If you do not top up an employee’s pay, then you should obtain the employee’s agreement to the reduction in pay while on furlough.
Which pay period should you use?
For salaried employees, you should use the employee’s gross salary in the last pay period prior to 19 March 2020 to calculate 80% of the pay for salaried workers.
If you have based the salary calculation on pay at 28 February 2020 as per previous HMRC guidance, then you can use this calculation for the first claim if there is a difference
What do you include in the salary calculation?
You should only include regular payments you are required to make to an employee such as their usual wage, past overtime and contractual commission payments.
You should not include discretionary bonus and commission payments or the cost of benefits.
How do you calculate pay for employees with irregular hours such as those zero-hour/casual contracts?
For those employed for 12 months or more, you can claim the higher of:
- the average monthly earnings from the 2019/2020 tax year or
- their earnings from the same month the previous year.
If they have been employed for less than 12 months, then you can claim for an average of their monthly earnings since they commenced work.
In both instances, past overtime can be included in these calculations.
Do you have to pay national insurance and pension contributions for furloughed employees?
Yes, but the grant will subsidise these costs
Can employees on sick leave, self-isolating or shielding be furloughed?
You can furlough employees on sick leave for short term absences if there are business reasons to do so.
Employees who are shielding or self-isolating in line with public health guidance can also be furloughed.
In both cases, they should not receive statutory sick pay and receive furlough pay.
You can also furlough employees on long term sick provided that they have exhausted their entitlement to SSP.
Can you furlough employees on unpaid leave?
Yes if they started unpaid leave after 28 February 2020.
However, if they went on unpaid leave on or before 28 February 2020, they cannot be furloughed until the agreed return date.
Can you furlough an employee who needs to stay at home to look after their children?
Yes.
Employees who are unable to work because they have child-caring responsibilities due to the impact of COVID -19 can be furloughed.
Can a furloughed employee work for another employer?
Yes they can, subject to the terms of their employment contract which may require them to obtain consent from their employer.
Given the current circumstances, employers should consider relaxing any such restrictive contractual provisions.
The guidance is also very clear that the employee must not carry out any work for associated business linked to the furloughing employer.
Can an employee be furloughed if they have two jobs with different employers?
Yes, they can be furloughed by one employer and continue to work for another.
Two different employers can also furlough the employee at the same time.
Does annual leave accrue holiday during furlough?
Yes it does.
Can you compel an employee take annual leave while on furlough leave?
There is currently a lot of debate in the legal sector on this point, and the position needs to be clarified by further government guidance.
If you compel an employee or even obtain their agreement to take annual leave whilst being furloughed then you will have to pay them their full rate of pay % for any annual leave taken during a period of furlough.
At present, we believe the safest approach is for employers is not to require employees to use their annual leave during furlough.
How do you deal with bank holidays that fall during furlough leave?
If the employee is contractually entitled to bank holidays as per their contract then you should either pay them in full for that bank holiday or allow them to take a day’s leave in lieu at a later date.
Can you furlough employees who were made redundant prior to the Coronavirus Job Retention Scheme being announced?
Yes, but only if an employee was made redundant on or after the 28 February 2020.
If this is the case, then such employees can be re-employed, placed on furlough and then you can make a backdated claim for their wages under the Scheme.
Unfortunately, any employees who were made redundant before 28 February 2020 will not be covered under the Scheme.
Can you furlough fixed-term employees?
Yes they can be furloughed.
You can also renew or extend their contracts during the furlough period as long as the extension takes place before the expiry of the fixed term.
Can employees on furlough be made redundant?
Employees can be made redundant while on furlough.
However, you must undertake a fair process as per normal Employment Law principles to avoid any claims of discrimination or unfair dismissal.
Can you furlough employee’s during their notice period?
Yes you can.
Can Directors be furloughed?
Yes, provided they are paid via PAYE, do no more than their limited statutory duties as an officeholder and do not perform any business-related services or revenue-generating work.
Can an employee on maternity leave, or other statutory family leave be furloughed?
This is a quite complicated area.
The Treasury Direction appears to suggest that employees on maternity leave can be furloughed.
But you can only claim for enhanced contractual maternity pay.
You cannot claim for any statutory maternity pay must continue to pay this to an eligible employee and reclaim in the usual way.
If an employee’s entitlement to maternity pay has been exhausted, and they agree to be furloughed this will result in their maternity leave coming to an end.
The same rules apply to other types of statutory family-related leave.
The guidance also makes it clear that when calculating furlough pay for an employee returning from any statutory family leave it must be based on their normal salary, not the pay they received while on leave.
How do you calculate statutory pay like SMP for an employee who has been furloughed prior to taking statutory family-related leave?
New regulations came into force on 25 April 2020 requiring that any statutory pay for maternity leave, paternity leave, adoption leave, shared parental leave and parental bereavement leave must now be based on the pay an employee would have received had they not been placed on furlough.
This ensures that such employees will not be disadvantaged if they are on a lower rate of furlough pay during the relevant period for determining their statutory pay.
Can foreign nationals with visas be furloughed?
Yes, they can, but they must be paid via PAYE and working in the UK.
Can self-employed individuals be furloughed?
No they cannot, but the Government has put in place support measures for such employee details of which can be found here.
Useful Links For Employers:
- Government guidance on the CJRS scheme can be found on the Government’s website here.
- A Treasury Direction accompanies the government guidance to HMRC published on 15th April 2020 setting our further details which can be read here.
- Guidance on calculating pay concerning the scheme can be found here.
- A step by step guide to the claims process can be found here.
- The online portal to access the scheme opened on 20th April 2020 and can be accessed here.
The information set out in the FAQ’s above are for general information only and under no circumstances should be use as a substitute for legal advice. Please note that due to the frequency of the announcements from Government about Covid-19 information on this page may change and require updating. Any information on this page should therefore not be regarded as comprehensive or relied upon when making decisions and you should always take legal advice which is relevant to your specific circumstances. Neathouse Partners accepts no responsibility for any loss or damage arising from any action taken or not taken by anyone using the information detailed on this page.
