Taylor Walton Guidance – Updated 2 June 2020
The Coronavirus Job Retention Scheme (“the Scheme”)
The introduction of a new Coronavirus Job Retention Scheme (also referred to as Furlough Leave) was announced by the Government on 20 March 2020. Further guidance was published on 27 March 2020 and has subsequently been updated several times, most recently on 29 May 2020.
In particular, on 29 May 2020, the Chancellor announced that from 1 July 2020, furloughed employees will be able to return to work on a part-time basis and from 1 August 2020, employers will be required to contribute towards the costs of employees on Furlough Leave. This note includes some information about these forthcoming changes to the Scheme. Full information about the changes is not expected until mid-June 2020 and we will update this note when further information is available.
The full guidance can be viewed here: https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme.
On 15 April 2020, the Treasury gave a Direction (the First Direction) to HMRC setting out the legal framework of the Scheme and a second Direction (the Second Direction) was published on 22 May 2020. The Second Direction addresses some discrepancies between the First Direction and the guidance referred to above and will apply to claims under the Scheme which are made after its publication and to claims made on or before that date where they would have been compliant with its terms. The First Direction applies to all other claims.
The Directions must be followed by HMRC when it makes payments to employers under the Scheme. Where there are inconsistencies between the Government guidance and the Treasury Directions, employers should follow the details set out in the Treasury Directions. The current Treasury Directions are stated to apply until 30 June. It is expected that a further Direction will be issued to cover the changes announced on 29 May 2020.
Please note that the guidance below is subject to any further information published by the Government in relation to the Scheme.
Other guidance on aspects of the Scheme is also available including:
- a step by step guide for employers relating to making claims. HMRC states that every employer who makes a claim must read this guide prior to submitting their claim (link below)
- a guide to calculating what can be claimed under the Scheme. This includes a link to an online calculator to assist employers to calculate the amounts that can be claimed under the Scheme (link below)
Under the Scheme, from 1 March 2020 until 31 July 2020, employers can reclaim up to 80% of wage or salary costs up to a cap of £2,500 per month, per employee, plus the associated employer National Insurance Contributions and minimum auto-enrolment pension contributions on that wage or salary. From July 2020, the level of the grant will be slowly tapered to reflect that people will be returning to work. Further details are set out in question 9 below.
The Scheme will close in full on 31 October 2020. The Scheme will also close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have furloughed for a full 3 week period prior to 30 June. This means that the final date by which an employer can furlough an employee for the first time will be 10 June, in order for the current 3 week furlough period to be completed by 30 June. Further, the new “flexible furlough” arrangements which come into force from 1 July 2020 will only apply to employees who have been on Furlough Leave on or before 10 June 2020.
HMRC opened an online claims portal on 20 April 2020 and payments should be received by employers within 6 days of submitting their claim.
The key points relating to the Scheme are:
1. Are all businesses covered by the Scheme?
The Treasury Directions state that any organisation with employees can apply, including charities, recruitment agencies and public authorities provided that they had a pay as you earn (“PAYE”) scheme registered on HMRC’s real time information system for PAYE on 19 March 2020. This is referred to in the Treasury Directions as a qualifying PAYE scheme. Government guidance states that it is also necessary for the employer to have a UK bank account.
Where an employer has more than one qualifying PAYE scheme, they will need to submit separate claims for each scheme.
The Government stated in its guidance that it does not expect public sector employers to use the Scheme as long as central Government continues funding wage costs in the normal way.
2. What employees are covered?
The Treasury Directions confirm that the Scheme applies to all employees on PAYE who were employed on 19 March 2020 provided the employer had submitted real time information payroll data by that date. This means that workers as well as employees are covered by the Scheme, including those engaged on zero hours contracts.
In order for the employer to claim payments under the Scheme in respect of a particular employee, the Treasury Directions state that an employee must also fall within the definition of a “furloughed employee”.
An employee is a furloughed employee if (a) the employee has been instructed by the employer to cease all work in relation to their employment; (b) the period for which the employee has ceased (or will have ceased) all work for the employer is 21 calendar days or more; and (c) the instruction is given by reason of circumstances arising as a result of coronavirus or coronavirus disease. Please see question 6 below in relation to how to designate an individual as a “furloughed employee”.
Prior to the Treasury Directions being issued, it was not entirely clear whether the Scheme was intended to apply only to those employees who would otherwise be made redundant. The First Direction clarified that the Scheme is not limited to those employees who would otherwise be made redundant. It applies to any who are furloughed “by reason of circumstances as a result of coronavirus or coronavirus disease”.
Employees that have been furloughed have the same rights as they did previously. This includes Statutory Sick Pay entitlement, holiday entitlements, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
3. Can employees whose employment terminated before or after the Scheme was announced be re-engaged by their previous employer and put on Furlough Leave?
There had been a discrepancy between the First Direction and the guidance in relation to which employees were eligible to re-engaged and placed on Furlough Leave. Following updates to the guidance and the publication of the Second Direction, the position is:
Employees made redundant or who stopped working after 28 February: you can re-employ them, put them on Furlough Leave and claim for their wages even if you do not re-employ them until after 19 March 2020. This applies as long as the employee was on PAYE payroll as at 28 February 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 28 February 2020. Wages can be claimed from the date that the employee was placed on Furlough Leave
Employees made redundant or who stopped working after 19 March 2020: you can re-employ them, put them on Furlough Leave and claim for their wages through the Scheme from the date on which they were placed on Furlough Leave. This applies as long as the employee was employed on 19 March 2020 and was on your PAYE payroll on or before 19 March 2020. This means an RTI submission notifying payment in respect of that employee to HMRC must have been made on or before 19 March 2020.
The guidance also states that if an employee has had multiple employers over the past year, has only worked for one of them at any one time, and is being furloughed by their current employer, their former employer/s should not re-employ them, put them on Furlough Leave and claim for their wages through the scheme.
4. Does the Scheme cover Apprentices?
Apprentices can be furloughed in the same way as other employees and they can continue to train whilst furloughed.
However, apprentices must be paid at least the Apprenticeship Minimum Wage, National Living Wage or National Minimum Wage (AMW/NLW/NMW) including the new rate from 1 April 2020 for all the time they spend training. This means that the employer must cover any shortfall between the amount that can be claimed for their wages through the Scheme and their appropriate minimum wage.
The Government has issued further guidance on Apprentices and their training arrangements at:
5. Does the Scheme cover any other individuals?
Yes, officeholders (including directors), salaried members of Limited Liability Partnerships (LLPs), agency workers (including those employed by umbrella companies) and workers can be furloughed under the Scheme. The Treasury Directions clarify the extent to which directors can undertake their duties to a company during a period of Furlough Leave and set out further details in relation to payments to LLP members.
Directors – the board of the company can decide that one or more directors should be furloughed. This should be formally adopted as a decision of the company, noted in the company records and communicated in writing to the director(s) concerned. The Treasury Directions state that a director who is furloughed can only undertake work to fulfil a duty or other obligation arising from an Act of Parliament relating to the filing of the Company’s accounts or provision of other information relating to the administration of the director’s company. This is a very narrow interpretation of directors’ duties.
These rules will also apply to salaried individuals who are directors of their own personal service company.
Updates to the guidance on 1 May 2020 confirm that directors who pay themselves once a year (typically one-person businesses where most revenue is taken as dividends) are, subject to certain conditions, eligible to be placed on Furlough Leave. This includes being notified to HMRC on an RTI submission on or before 19 March 2020 which relates to a payment of earnings in the 2019/2020 tax year.
LLP members – those who have been designated as employees for tax purposes (‘salaried members’) under the Income Tax (Trading and Other Income) Act 2005 are eligible to be furloughed. The terms of the LLP agreement may need to be varied by a formal decision of the LLP. The reference salary for the Scheme is the LLP member’s profit allocation, excluding any amounts which are determined by the LLP member’s performance, or the overall performance of the LLP.
Agency Workers – Furlough Leave should be agreed between the agency, as the deemed employer, and the worker, though it would be advisable to discuss the need to furlough with any end clients involved. As with employees, agency workers should perform no work for, through or on behalf of the agency that has furloughed them while they are furloughed, including for the agency’s clients. Where an agency supplies clients with workers who are employed by an umbrella company that operates the PAYE, it will be for the umbrella company and the worker to agree whether to furlough the worker or not.
6. Can an employer insist on putting someone on Furlough Leave?
The guidance, the First and the Second Treasury Direction state that in order to be eligible to make a claim under the Scheme, the employer must agree with employees that they will be placed on Furlough Leave. In other words, they cannot simply inform the employee that they will be furloughed from a particular date without the employee’s agreement. This is the case regardless of whether or not the employment contract includes a right to impose layoffs or short time working.
Due to inconsistencies between the guidance and the Treasury Directions about whether an employee must agree in writing to be placed on Furlough Leave, there has been much debate amongst employment law practitioners about what steps should be taken to implement a period of Furlough Leave.
Taking into account the lack of clarity in this area and normal requirements in relation to varying fundamental terms of the employment contract such as working hours and pay, our view is that the safest approach is to agree any Furlough Leave arrangements with staff in writing. The written agreement should be kept until at least 30 June 2025.
The simplest way to implement a period of Furlough Leave is to write to the employee seeking their agreement to the Furlough leave arrangements. This will include an instruction not to attend work and information about changes to pay and benefits whilst they are not attending work. Employees should be asked to confirm their agreement to the arrangements in writing. Email or other electronic communications are sufficient in the circumstances.
From 1 July 2020, if you wish for some employees to return to work on a part time basis, current guidance confirms that the arrangements will need to be recorded in writing. Further guidance in relation to the new “flexible furlough” is expected in mid-June 2020.
The danger for the employer of failing to demonstrate that an agreement has been reached with an employee may mean that the employee does not meet the definition of a “furloughed employee” set out in the Treasury Directions and that the employer cannot therefore make claims under the Scheme for that employee’s wage costs.
Where the employer is not placing the whole workforce on Furlough Leave, a fair and objective selection process should be conducted to avoid discrimination claims.
7. Can an employee request their employer puts them onto Furlough Leave?
Yes, an employee can request this, but the employer does not have to agree. Potentially redundant employees do not have a right to require their employer to place them on Furlough Leave as an alternative to redundancy. However, it is hoped that many employers will see the Scheme as preferable to business closure and making redundancies. If the employee makes a request, the employee should be asked to make the request in writing. The employer should then respond in writing setting out the terms of the agreement which the employee should be asked to sign. The signed agreement should be retained until at least 30 June 2025.
8. How do you select for Furlough Leave?
The employer needs to determine which employees they require and those which can be sent home. This will require fair and objective criteria, similar to a redundancy situation. Once a selection exercise has been carried out, employers should contact the relevant employees to seek agreement to place the employee on Furlough Leave.
If the employer intends to bring some employees back to work on “flexible furlough” from 1 July 2020, this selection should also be dealt with in a fair and objective manner.
9. What does the reimbursement cover?
From 1 March 2020 until 31 July 2020, employers can reclaim up to 80% of wage or salary costs up to a cap of £2,500 per month, per employee, plus the associated employer National Insurance Contributions and minimum auto enrolment pension contributions on that wage or salary. From July 2020, the level of the grant will be slowly tapered to reflect that people will be returning to work: In particular:
From 1 July 2020, employers can bring back to work those employees that have previously been on Furlough Leave for any amount of time and any shift pattern, while still being able to claim the grant for their normal hours not worked. Employers will be responsible for paying wages which relate to any hours worked plus any associated National Insurance and pension contributions. The grant will cover any hours not worked plus associated National Insurance and pension contributions. The minimum period an employee can be placed on “flexible furlough” will be one week but can be longer.
- From 1 August 2020, the grant will continue to cover 80% of wages up to a cap of £2,500 for the hours the employee does not work. However, employers will be responsible for paying associated National Insurance Contributions and pension contributions.
- From 1 September 2020, the grant will cover 70% of wages up to a cap of £2,187.50 for the hours the employee does not work. Employers will be required to pay associated National Insurance contributions and pension contributions plus 10% of wages to make up the 80% total up to a cap of £2,500.
- From 1 October 2020, the grant will cover 60% of wages up to a cap of £1,875 for the hours the employee does not work. Employers will be required to pay National Insurance and pension contributions and 20% of wages to make up the 80% total up to a cap of £2,500.
The cap will be proportional to the hours not worked and further guidance is expected on the level of reimbursement once “flexible furlough” commences.
For full time and part-time salaried employees (i.e. those who earn an annual salary in respect of a particular number of hours per year and are paid in regular, equal instalments), the employee’s actual salary before tax, as of 19 March 2020, should be used to calculate the 80%.
The guidance, the First Direction and the Second Direction all contain slightly different wording on what can be included in the 80% calculation. However, it is clear that the employer must disregard anything which is not “regular salary or wages”.
Taking into account the requirements of the Treasury Directions and the guidance, payments which should be included are any payments that the employer has a contractual obligation to pay and which the employee has an enforceable right to receive, non-discretionary payments for hours worked, non-discretionary fees and commission payments, piece rate payments and variable payments specified in a contract that are always made.
Amounts that should be excluded from the calculation include discretionary payments or bonuses, non-cash payments or non-monetary benefits such as a company car and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay.
Due to the complexities of the Treasury Directions and the guidance, employers should consider taking advice in relation to any payments that they are unsure about.
The guidance also clearly states that the entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money. No part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.
The Treasury Directions and guidance state that employers cannot claim additional National Insurance or pension contributions which are made because the employer choses to top up an employee’s salary or any pension contributions made above the mandatory employer contribution.
10. How do we work out what to pay to zero-hours workers?
For these workers, the employer can claim for the higher of (i) the same month’s earning from the previous year (e.g. earnings from March 2019); or (ii) average monthly earnings in the 2019-20 tax year.
If the worker has been engaged for less than a year, the employer can claim for an average of their monthly earnings since they started work. If the worker only started in February 2020, the employer should use a pro-rata for their earnings so far to claim.
When the employer has worked out how much of a worker’s wages the employer can claim for, the employer must then work out the amount of Employer National Insurance Contributions and minimum automatic enrolment pension contributions that can be claimed.
11. Are employers obliged to top up the remaining 20%? What about if the employee is only paid National Minimum Wage?
There is no obligation to top up wages until 31 August 2020. Thereafter, employers will be obliged to top up wages to 80% as set out in question 9 above.
Individuals are only entitled to the national minimum wage for the hours they work. So if they are furloughed and do not work and 80% of their normal earnings would take them below the minimum wage based on their normal working hours, they still only receive 80% as they are not working. However, they are entitled to be paid national minimum wage for any time spent training during Furlough Leave and employers will be obliged to top up payments in such circumstances.
12. How do we treat benefits and salary sacrifice schemes?
The reference salary used to calculate 80% should not include the cost of non-monetary benefits provided to employees (for example, insurances and company vehicles). 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. Where the employer provides benefits to furloughed employees, these should be continued in addition to the wages that must be paid under the terms of the Scheme unless an alternative agreement can be reached with employees. The guidance states that the entirety of the grant received to cover an employee’s subsidised furlough pay must be paid to them in the form of money and that no part of the grant should be netted off to pay for the provision of benefits or a salary sacrifice scheme.
Some employees may wish to cease salary sacrifice arrangements at the current time in order that their reference salary for the purposes of the Scheme is higher. HMRC has acknowledged that the current Covid 19 crisis justifies such a change although this matter is not specifically covered in the Treasury Directions. This means that it may be possible for the employer and the employee to agree a change to the contract of employment to cease the salary sacrifice arrangement and increase normal salary payments and that the new higher salary can then be used for the purposes of working out the 80% figure to be claimed under the Scheme. Employee pension contributions would then be deducted from their salary in the usual way.
13. What about employees who are on sick leave?
Employees cannot be on sick leave and Furlough Leave at the same time.
However, updates to the Government guidelines state that short term illness and self-isolation should not be a consideration in deciding whether to furlough an employee. Employers can decide to furlough employees who are on sickness absence. However, the Treasury Directions state that where an employer decides to furlough an employee on sickness absence, the period of Furlough Leave will not commence until the period of sickness absence during which statutory sick pay is being claimed has expired.
Where an employee who has been placed on Furlough Leave becomes unwell, the Treasury Directions state that there is no requirement to take the employee off Furlough Leave and place the employee on sick leave. It may be preferable for both the employee and the employer for an unwell employee to remain on Furlough Leave.
14. Can we furlough employees who are shielding in accordance with public health guidance?
Employees who are unable to work because they are shielding in line with public health guidance (or need to stay at home with someone who is shielding) can be placed on Furlough Leave.
15. What about employees who cannot work due to caring responsibilities?
Employees who are unable to work because they have caring responsibilities resulting from coronavirus can be furloughed. For example, employees that need to look after children can be furloughed.
16. Employees on fixed-term contracts
Employees on fixed-term contracts can be furloughed if they are eligible (see question 2 above). Their contracts can be renewed or extended during the furlough period without breaking the terms of the Scheme.
Recent update to the guidance also confirms that an employee who was engaged on a fixed-term contract can be re-employed, place on Furlough Leave and claimed for if either:
- their contract expired after 28 February 2020 and an RTI payment submission for the employee was notified to HMRC on or before 28 February 2020; or
- their contract expired after 19 March 2020 and an RTI payment submission for the employee was notified to HMRC on or before 19 March 2020.
17. Employees on Unpaid Leave or Sabbaticals
Employees who are on unpaid leave or sabbatical cannot be placed on Furlough Leave during the period that the unpaid leave was intended to continue.
18. Employees who have been transferred pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
A new employer is eligible to claim under the Scheme in respect of the employees of a previous business transferred after 28 February 2020 (previously 19 March 2020) where TUPE applies to the change in ownership. Normal eligibility rules regarding the employees who are covered by the Scheme will apply (see question 2 above).
19. Can holiday be taken during Furlough Leave?
This is not explicitly covered in the Treasury Directions. However taking account of guidance issued by ACAS and the Government, the position seems to be that the normal rules relating to holiday entitlement and pay will apply and a period of holiday leave will not break the Furlough Leave.
This means that employees (and workers) will continue to accrue annual leave as normal in accordance with their employment contract during Furlough Leave. Employees will still be entitled to a minimum of 5.6 weeks (28 days for a full time worker) of paid annual leave in this holiday year, regardless of whether or not they have been furloughed. If employees usually receive more than 5.6 weeks annual leave, the employer and employee can agree to vary the employee’s holiday entitlement as part of the employee’s agreement to be placed on Furlough Leave (as long as the total amount does not fall below the 5.6 weeks minimum).
Employees can request and take holiday as normal during Furlough Leave (subject to employer agreement) including bank holidays. However, employees must be paid at their normal rate of pay and employers will be obliged to top up the amount they are reimbursed from HMRC to the employee’s normal pay.
An employer can require an employee to take holiday on particular dates but must give the employee notice twice the period of a holiday to be taken. For example, if the employer requires the employee to take 1 week holiday, they must give at least 2 weeks’ notice of this. If employees are being directed to cancel a holiday, a period of notice equal to the period of holiday due to be taken must be given. This is subject to any provisions in the employment contract allowing for different notice requirements.
New regulations have also been made allowing for employees to carry over some of their holiday entitlement to the next two holiday years where they have not been able to take it due to the pandemic. Whilst this may apply to employees on Furlough, the guidance on this legislation states that most employees who have been furloughed should be able to make use of their holiday entitlement whilst they are on Furlough Leave.
HMRC has confirmed that the holiday policy with regards to Furlough Leave will be kept under review.
20. What do we pay to employees who are serving their notice period whilst on Furlough Leave?
This is not specifically dealt with in the Treasury Directions or the guidance. Existing employment law on notice rights will likely apply although this is a complex area of law and specific advice may need to be sought. In addition, it is possible that further updates will be made to the guidance or the Treasury Directions to specifically deal with the relationship between Furlough Leave and notice rights.
Applying existing law, employees who are entitled to statutory minimum notice only have the right to receive a minimum level of payment during the notice period based on the provisions of the Employment Rights Act 1996 which provide for “a week’s pay”. In essence these employees should receive “a week’s pay” for each week of their notice period. For employees who have regular hours of work, this is likely to be their normal rate of pay rather than the reduced rate they are receiving during Furlough Leave. For employees with variable hours or pay, the rate of pay will depend on the specific arrangements.
Employees do not qualify for minimum levels of pay during the notice period if they have a notice period which is a least one week greater than the statutory minimum notice period. For these employees, their pay during a furloughed notice period would likely be whatever they have agreed to receive while on furlough, usually 80% of normal salary subject to a £2,500 per month cap.
An employee will be entitled to statutory minimum notice only where they are entitled to one week’s notice during the first 2 years of employment, increasing by 1 week for each subsequent complete year of employment subject to a maximum of 12 weeks’ notice after 12 years of employment.
21. How do we treat employees on family leave (such as maternity or paternity leave)?
If an employee is eligible for Statutory Maternity Pay (SMP) or Maternity Allowance (or similar), the normal rules apply.
Employees who qualify for SMP (or similar), 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 £151.20 a week from April 2020.
New regulations which came into effect on 25 April 2020 confirm that an employee’s normal rate of pay (rather than any reduced rate paid during Furlough Leave) should be used for the purposes of calculating whether an employee is eligible to receive SMP and also the employee’s average weekly earnings.
The regulations apply in a similar way in relation to maternity allowance, statutory paternity pay, statutory adoption pay, statutory shared parental pay and statutory parental bereavement pay. The aim of the regulations is ensuring that employees are not disadvantaged in relation to these statutory payments as a result of their being on Furlough Leave. The regulations apply where the first day of the period in which the relevant payment or allowance is payable is on or after 25 April 2020.
If an employer offers enhanced contractual pay to employees on Maternity Leave (or similar), this is included as wage costs that the employer can claim through the Scheme. The same principles apply where the employee qualifies for contractual adoption, paternity or shared parental pay.
The guidance and the Treasury Directions do not prohibit women on maternity leave agreeing to return to work early and then being furloughed, or electing to change to shared parental leave and then being furloughed. Any requests should be dealt with fairly and employers can require employees to comply with the normal notice requirements to change their return to work date. Usually employees are required to give 8 weeks’ notice of the change in date.
22. If an employee refuses Furlough Leave can we make them redundant?
Yes, subject to normal employment law considerations including consultation.
23. If we put an employee or worker on Furlough Leave, can we get them to come back to work and then put them on Furlough Leave again if we need to?
Furlough Leave must be taken in minimum blocks of three consecutive weeks (21 days) to be eligible for funding. Employees can be taken on and off Furlough Leave and businesses could consider rotating staff on Furlough Leave on a three week basis subject to agreeing on the arrangements with the relevant employees (see question 6 above).
The last date that an employer can place an employee on Furlough Leave for the first time is 10 June 2020.
24. Can we conduct redundancy consultation with staff whilst they are on Furlough Leave?
Yes, you will need to ensure that appropriate steps are put in place to enable employees to properly participate in the consultation process despite the fact that face to face meetings are not currently possible.
If you are consulting on a collective basis (because you are proposing to dismiss 20 or more employees at one establishment within a period of 90 days) you will also need to put appropriate measures in place to enable election of employee representatives.
25. Can employees work for our business whilst on Furlough Leave?
Until 30 June 2020, the employee must not be working at all for the employer who has put them on Furlough Leave or any linked or associated organisation. This includes providing services and generating revenue. If they work for even an hour during Furlough Leave they are not eligible. However, they are able to undertake training and do volunteer work, provided they do not provide services to the employer or make any money for their employer.
The most recent version of the guidance also confirmed that employees who are union or non-union representatives may undertake duties and activities for the purpose of individual or collective representation of employees or other workers. This means the period of Furlough Leave will not be broken if an employee accompanies a colleague during disciplinary or grievance meetings or participates in a redundancy consultation.
If an employee has more than one employer they can be furloughed for each job. Each job is separate, and the cap applies to each employer individually.
From 1 July 2020, employees who are on Furlough Leave will be able to return to work on reduced hours where necessary. This is known as “flexible furlough” and further information about how this will work is expected in mid-June 2020.
26. Can an employee take a new job with another employer during Furlough Leave?
Subject to any conditions in their contract of employment relating to other employment, an employee who has been put on Furlough Leave can take up new employment with another employer whilst on a period of Furlough Leave.
27. How do we end Furlough Leave?
Ideally, you will have stated the arrangements in the letter to your employee placing them on Furlough Leave. Many employers have reserved the right to bring the period of Furlough Leave to an end early or to extend Furlough Leave where necessary.
If you wish to bring your employees back to work on a “flexible furlough” arrangement, the new arrangements will need to be agreed with the employees.
You will need to contact your employee to make appropriate arrangements taking account of current guidance on working from home and social distancing.
28. What will be the process for getting the money back?
HMRC has set up a claims portal which opened on 20 April 2020. To make a claim you will need the following details:
- your ePAYE reference number
- the number of employees being furloughed
- National Insurance numbers for the employees you want to furlough
- Names of employees you want to furlough
- Payroll/works number for the employees you want to furlough
- Your Self-Assessment Unique Taxpayer Reference or Corporation Tax Unique Taxpayer Reference or Company Registration Number
- the claim period (start and end date)
- amount claimed (per the minimum length of furloughing of 3 weeks)
- your bank account number and sort code
- your contact name
- your phone number
Once the “flexible furlough” arrangements commence, the employer will also need to submit details of normal working hours and actual hours worked during the claim period.
You will need to calculate the amount you are claiming. HMRC will retain the right to retrospectively audit all aspects of your claim. You can set your own claim period and you can only make one claim for each claim period. It is therefore important that all relevant employees are included in each claim. Many employers are expected to coordinate their claim period with their payroll runs.
From 1 July 2020:
- the number of employees an employer can claim for in any claim period cannot exceed the maximum number they have claimed for under any previous claim under the current Scheme;
- claim periods will no longer be able to overlap months, employers who previously submitted claims with periods that overlapped calendar months will no longer be able to do this going forward. The Government states that this is necessary to reflect the forthcoming changes to the scheme. Employers can continue to make claims in anticipation of an imminent payroll run, at the point payroll is run or after payroll has been run;
- claim periods will be a minimum of one week but can be longer.
If you have fewer than 100 furloughed staff you will be asked to enter details of each employee you are claiming for directly into the system. This will include their name, National Insurance number, claim period and claim amount, and payroll/employee number (optional). If you have 100 or more furloughed staff you will be asked to upload a file with the information rather than input it directly into the system. HMRC will accept the following file types: .xls .xlsx .csv .ods. The file should include the following information for each furloughed employee: name, National Insurance number, claim period and claim amount, payroll/employee number (optional).
You should retain all records and calculations in respect of your claims.
HMRC aims to pay employers within 6 working days after the submission of their claim. Employers will then be able to claim 14 days before payments are due to employees.
29. Who pays the employee during Furlough Leave?
The employer continues to pay the employee and claims reimbursement from HMRC.
Unless an employee agrees to defer their salary or wages payment until such time as the employer receive payment under the Scheme, the employer should continue to pay employees at the normal time. Whilst this may cause cash flow issues for some businesses, failing to pay employees at the normal time may lead to claims for breach of contract and/or unlawful deductions from wages.
30. Tax Treatment for employees and employers
Wages of furloughed employees will be subject to Income Tax and National Insurance as usual. Employees will also pay automatic enrolment contributions on qualifying earnings unless they have chosen to opt-out or to cease saving into a workplace pension scheme.
Employers will be liable to pay Employer National Insurance Contributions on wages paid, as well as automatic enrolment contributions on qualifying earnings unless an employee has opted out or has ceased saving into a workplace pension scheme. These sums are reimbursed under the Scheme as set out at question 9 above.
Payment made to employers under the Scheme must 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.
Members of the Taylor Walton Employment Team are available to assist you with any employment law queries or concerns arising out of the Coronavirus Pandemic. In the first instance please contact Alec Colson on alec.colson@taylorwalton.co.uk or on 07711 589574.