The Government has announced that all UK employers will be able to access support to continue paying part of their employees' salary for those employees that would otherwise have been laid off during this crisis. BCC has sought clarification from Ministers on the detail of the scheme and will update these FAQs as further information is obtained.
The official guidance states businesses will need to:
HMRC will reimburse 80% of furloughed workers wage costs, up to a cap of £2,500 per month. HMRC are working urgently to set up a system for reimbursement. Existing systems are not set up to facilitate payments to employers. The scheme will cover the cost of wages backdated to March 1st and is initially open for 3 months but will be extended if necessary.
If your business needs short term cash flow support, you may be eligible for a Coronavirus Business Interruption Loan.
How do employers evidence to HMRC that an individual is a furloughed worker?
A schedule of furloughed workers will need to be produced and submitted to HMRC through a new portal being created for the purpose. Still waiting further guidance but would assume the following information will need to be included:
In what time frame will firms be reimbursed for furloughed workers?
Full details are still awaited. HMRC are having to build a new portal for this and in effect will be reversing the normal flow of monies from collection, to payment. We understand that this will be via a grant from HMRC (not a loan). They are aiming to have this in place by the end of April.
You can only submit one claim for a minimum 3 week period which is also the minimum term an employee can be furloughed for.
Is there a duration attached the furloughed status?
|The scheme will continue for 3 months currently but will be reviewed by the government. We expect that you will be able to recall employees before 3 months should your business require them. The minimum term for an employee to be furloughed is 3 weeks The scheme is backdated to 1st March 2020 but only for employees who may already have been affected prior to the announcement of the scheme on 20th March.|
What is the definition of "salary" on which 80% pay should be calculated on?
This has now been confirmed to be only on base salary and excludes commission and bonuses, but employers are able to claim Employers National Insurance contributions and minimum automatic enrolment employer pension contributions.
There is a maximum payment cap of £2,500 for employees, however the employer is able to add the aforementioned Employers National Insurance and minimum automatic employer pension contributions to the calculation.
5. SICK LEAVE
Can employees who are certified as sick be made furloughed workers?
6. Is it available for employees already receiving statutory or contracted sick pay?
5. Employees on sick leave should be paid SSP for the duration. They can subsequently be furloughed
6 As above
7 OTHER LEAVE
Can employees who are off on any other leave eg maternity leave or paternity leave etc be made furloughed workers?
8 Will other periods of authorised absence be suspended during this time eg maternity leave?
No. For employees on maternity leave the normal rules apply. If you offer enhanced (earnings related) contractual pay to women on Maternity Leave, this is included as wage costs that you can claim through the scheme. The same principles apply where your employee qualifies for contractual adoption, paternity or shared parental pay.
Furlough is a temporary lay off and in this case the government have undertaken to pay up to 80% of salary as a mechanism to prevent mass unemployment where an employee may be expected to resume work again in the future. It will not replace other schemes such as Maternity leave which will remain in place. Most of the SMP can already be recovered by employers.
WORKING WHILE FURLOUGHED
9 Can we furlough workers on a rolling basis?
10 Can employees work for other employers whilst furloughed eg supermarkets, NHS?
11 Can employees intermittently be furloughed, punctuated by periods of paid holiday or working?
12 Can furloughed workers be rotated back into the business?
13 Can furloughed workers undertake ad hoc work for the business?
9. You can furlough additional workers during the period the scheme is in operation in line with business requirements subject to the minimum claim periods (three weeks).
10. Furloughed employees cannot work for you during this period, including training if this is considered to be work. Their NI number will be supplied to HMRC, this is a unique identifier so unless their work was voluntary and unpaid, they are not able to work for your organisation. They still remain your employees. However, if an employee has more than one employer (multiple jobs), provided it is permitted within your employment contract, they can continue to work for one employer and be furloughed by another. If that employer subsequently decides to furlough the same rules apply and they can receive 80% of their salary from that employer. The 80% of salary or £2,500 cap applies to each job. The current guidance issued on the scheme appears silent on whether an employee can then subsequently take further paid employment whilst still being furloughed. No doubt further guidance will be issued but what is clear is that the scheme will be based on an employment by employment basis.
11. Further clarity is still required but theoretically each claim covers specific employees therefore you may be able to bring them back into work for the following period to undertake paid work. It should be noted that employees will continue to accrue annual leave whilst furloughed so you wouldn't change an employee's status from furlough due to holiday.
12. As it is a separate claim for each period furloughed workers can be brought back into work on a gradual basis as required by the business recovery within the time parameters of the scheme (currently 3 months). Unless the government elect to extend the scheme, other action may need to be considered beyond the initial term.
13. Furloughed workers are not allowed, to undertake any work for the business. The BCC has asked the government for more flexibility in the scheme
14 Will employees continue to accrue annual leave while furloughed?
15 How will holiday entitlement and pay be treated during the furlough period?
16 Do we need to pay-up all accrued but unused holiday to the point of furlough?
17 Should I ask employees to take annual leave before furloughing?
18 Are we expected to deduct used but not accrued holidays to this point?
14 Holiday leave will continue to be accrued during the furloughed period.
15 Whilst an employee is furloughed, no other payments, such as holiday pay should be made. The employee is in effect temporarily 'laid off' as opposed to permanently laid off
16 No. This is not necessary as holiday leave will continue to accrue whilst they are furloughed
This is a matter for each business to consider. The purpose of furloughing is to prevent unemployment and to ease financial pressures on a business in order that it can survive a temporary downturn in business. Asking an employee to take leave will result in the company continuing to pay the employee which in the current climate may not be an attractive proposition
18 No. The worker will remain an employee during the period of furlough and retain contractual benefits other than that around pay
Will PAYE continue to be deducted in the normal way?
|HMRC will pay a grant to the employer who will process the furloughed employees through their payroll as normal so PAYE and Employee National insurance contributions will be deducted. Employees will also continue to make automatic enrolment contributions on qualifying earnings unless they have elected to opt out or have ceased savings into a workplace pension plan|
20 TRADE UNIONS
Can Trade Unions negotiate on behalf of all employees in a collective agreement situation?
|Yes, this is possible where such an agreement is in place.|
Can we deduct pension, and other voluntary deductions from furloughed workers pay?
|Do pension contributions continue or are they suspended? Employees will continue to make automatic enrolment contributions on qualifying earnings unless they have elected to opt out or have ceased savings into a workplace pension plan Pension contributions will continue as outlined above|
Does the scheme apply equally to all workers?
The scheme is open to all UK employers that had created and started a PAYE payroll scheme as at 28 February 2020. Therefore, it does not cover:
Any UK organisation with employees can apply, including:
Provided they were on the payroll before 28 February you can claim for any type of employee including:
23 How should an employer agree furloughed status with an employee ie in writing?
24 Is a template letter available?
23 Your affected employees will need to be designated 'furloughed workers' and this will need to be confirmed in writing. It is important to note that changing employees' employment rights is still subject to employment law and unless lay off or short time working clauses are included in contracts of employment, separate negotiation may be required. It is best to take employment advice on this point.
24 Yes, we have made a template furlough letter available, located in the ChamberHR reference library under the Redundancy section. Alternatively if you don't have access to ChamberHR please send an email to firstname.lastname@example.org and a free template letter will be sent to you
|25 Will I need to top up the other 20%?||You can fund the difference if you wish but there is no obligation to do this under the scheme|
|26 Are there any conditions for the employer attached to applying furloughed status eg should we guarantee continued employment for a period?||The employee cannot work for you if furloughed. The scheme will continue for at least 3 months The government has indicated that there is no requirement on the employer that employment needs to be guaranteed afterwards. At this point it may be necessary to consider termination of employment. It is important that you seek further advice on this prior to taking any action as employment law still applies and if carried out incorrectly you may find yourself subject to an Employment Tribunal claim|
|27 What options do we have to give our employees alongside the option to become a furloughed worker eg statutory redundancy?||The idea behind the Coronavirus Job Retention Scheme (CJRS) is for businesses to retain employees during the period in order that they can bring them back when the business situation improves (subject to the current scheme duration)|
|28 Can workers be required to take furlough leave?||Furlough is an alternative to permanent lay off/redundancy. Provided your contracts of employment include the appropriate clauses to enable you to change their status you can impose this.|
|29 Can employers continue to contact furloughed employees?||The employee cannot work for you during this period (even making phone calls or sending email); however, we would imagine that it would okay to periodically keep in touch from an employee welfare aspect|
|30 Can I re-hire staff who I have recently made redundant?||The scheme is to be backdated to 1st March 2020 so therefore you could theoretically withdraw the redundancy notice if it took place within this period. You would need to seek employment advice as to how to achieve this through the ChamberHr advice lines. Anyone made redundant prior to this date is not eligible for this scheme|
|31 Can we use the scheme for staff whose start date has been deferred or where offers have been withdrawn?||No. You can only furlough employees who were on the payroll as at 28 February 2020.|
|32 How will pay be calculated in the case of employees with varying remuneration eg those working on commission?|
Commission and bonus earning are excluded. For employees whose earnings fluctuate for other reasons you can claim the following
|33 Can furloughed workers receive training?||A furloughed employee can take part in training as long as it does not provide services or revenue to the business. If workers are required to complete training in connection with the business, they must be paid the National Living Wage or National Minimum Wage for the time spent training.|
|34 Will redundancies be considered unfair in circumstances where employers could have applied for the scheme?||Companies should explore all options and adopt the best option for their company. The job retention scheme is to avoid mass redundancies and unemployment; however, in some cases there may be no alternative.|
|35 Will any 'special circumstances' defence be compromised by the scheme where the employer feels financially compelled to ignore the obligation to consult on collective redundancies prior to any dismissals or seeks to shorten the mandatory collective consultation period?||Companies must ensure they always follow due process; failure to do so may result in unfair dismissal claims. Employment Tribunals may be sympathetic to the current situation but will not look favourably where companies have deliberately failed to follow a fair and reasonable process.|
|36 Will the scheme be extended beyond 3 months?||Possibly, depending on how long the crisis continues but the decision lies with the government and currently there is no guarantee beyond the 3 month period|
|37 What does the scheme offer to charities?||The scheme is available to employees remunerated through the PAYE. Charity workers remunerated this way will qualify|
38 Can employers furlough Tier 2 migrants under the scheme?
If so, what are the notification requirements for employers?
Are furloughed employees still required to meet minimum salary thresholds?
|The Home Office has confirmed that migrants can be furloughed, as this does not count as a benefit.|
|39 Can Directors furlough themselves?||If a director is on the payroll, they can technically furlough themselves; however, the concern for directors is that they will often take a lower or even no salary from the business. Instead they will often utilise dividends to top up their income, as and when they have the profits to do so. As dividends are not subject to PAYE, the dividend amounts are unlikely to form part of the calculation for the director. Directors in this position are likely to find that should they qualify for a CJRS grant, the amount paid would likely be 80% of a low salary. A further concern is that a director must be non-active to be furloughed but given they will continue to need to manage the business in some way, they are unlikely to be completely in-active and therefore may fail the CJRS requirements.|
|40 Can staff refuse to be furloughed?||Yes; staff must agree to be furloughed and cannot be forced. If an employee refuses; the company should consider alternative options for example; redundancy.|
|41 I understand that the employment contract has to allow variation in terms at company discretion otherwise a consultation period of a month is needed. If this is done, I assume the company can still back date the application of the furlong?||Typically, where there is no contractual clause to vary the contract or lay off employees; employers must enter a period of consultation and seek employee agreement prior to applying the changes to the contract. However, this is an exceptional situation and many companies do not have time to conduct a consultation period. The government have offered the CJRS and therefore companies should discuss the options with their staff openly and frankly and seek agreements from staff. The aim is to avoid redundancy situation.|
|42 Does the company have to prepare a continuity plan to apply for furlough||No continuity plan is required to apply for a CJRS grant, however when selecting employees, employers should be aware that equality and discrimination laws will apply in the usual way.|
|43 Can holiday leave be carried over?||Working Time Regulations will be amended. Workers who have not taken all of their statutory annual leave entitlement due to COVID-19 will now be able to carry it over into the next 2 leave years|
|44 For students that are PAYE tax exempt but paying NICs - are they still eligible?||Furloughed employees must have been on your PAYE payroll on 28 February 2020. If the employees are earning below the tax threshold (£12,500 a year) they would still be eligible to claim. Further information should be available when HMRC publish the full guidelines.|
|45 If making staff redundant after furlough has ended, do normal redundancy rules apply (eg one week for each year of continual service above minimum close of contract notice to a maximum of 12 weeks).||Yes the usual redundancy procedure will apply and payments should be made according to the redundancy policy if the organisation have one or statutory redundancy guidelines.|
|46 How quickly can HMRC process payments?||No definitive time scales have been provided regarding time scales of when payments will be made however, they envisage the portal to be open by the end of April 2020.|
|47 How much of this process will be automated in terms of BACS payments to our business account?||Once HMRC have received your claim and you are eligible for the grant, payments will be made via BACS payment to a UK bank account. Claims will need to be made in accordance with actual payroll amounts at the point at which you ran your payroll or in advance of an imminent payroll.|
48 How should pension deductions be calculated for employees on Furlough?
Should the 80% furloughed payment be the new reference salary or should deductions continue as normal?
The maximum grant will be calculated per employee and is the lower of:
Commission, fees and bonuses should not be included.
|49 Can furloughed employees continue to have salary sacrifice deductions taken from their pay?||Agreement will need to be sought before suspending salary sacrifice arrangements as these arrangements have been contractually agreed and would, in general, have to be terminated and dealt with subject to that agreement. We would advise completing a cost - benefit analysis before carrying out this measure as dependant on policies employers and employees may be required to pay more tax and National insurance contributions|
|50 Can voluntary deductions eg private medical insurance continue to be deducted from employees on furlough?||Yes providing the scheme is still in operation and the employee has no objection to continuing with their scheme.|
|51 For employees with variable pay, where Feb 2019, or average of last 12 months is used as reference, is taxable pay the reference pay referred to?||Yes, the average pay over the last 12 months will need the calculated as gross and then the 80% of this amount will be used as part of the Furlough pay calculations.|
|52 Will employers use the FPS via RTI to notify HMRC that a worker is furloughed, will an effective date be required?||Yes this will be used. You will be required to make the claim via the online portal once it is set up and the information from your RTI will be used. An effective date will be required when making your claim via the portal.|
|53 What other evidence will HMRC require to prove that a worker has been furloughed?|
To claim, you will need:
|54 Can an employees pay frequency change during furloughed status?||This is subject to agreement from the employee to change their payment frequency.|
|55 How should employees who were due a pay rise during the furloughed period eg NMW increases, be treated - should the new rate of pay apply.||The government have stipulated that pay will be based on the earnings prior to 28 February 2020 however there are no clear guidelines whether the change in NMW will be included as this is effective from April 2020.|
|56 Can all temporary staff be furloughed ie are those with an employment contract treated differently to those with a service contract?||Temporary employees can still be furloughed providing they were on the company's PAYE payroll on 28 February 2020.|